Maltese is a privately-owned company. On September 3, Maltese exchanged 2,000 shares of its private common stock for equipment. There is no readily available estimate of the stock's fair value. The equipment currently is selling for $80,000. The journal entry to record this transaction includes:

Question

Quizplus · Accepted Answer

The journal entry needs to reflect the exchange of the 2,000 shares for equipment. Since the fair value of the stock is not readily available, it cannot be used to determine the value of the transaction. However, the current selling price of the equipment can be used to value the exchange. Therefore, the entry should include a debit to Equipment for $80,000 to reflect the value of the equipment received. There is no cash or stock revenue involved in this transaction so options A and B can be eliminated. Option D is also incorrect as a journal entry is required to record the transaction.

Maltese Is a Privately-Owned Company