A company acquires land by issuing 10,000 shares of its $10 par value common stock which is currently trading at $20 per share,and the appraised value of the land is $250,000.Which of the following statements correctly describes the recording of the land?

Question

Quizplus · Accepted Answer

The land should be recorded at the value of the consideration given up, which in this case is the 10,000 shares of $10 par value common stock, or $200,000. The fact that the stock is currently trading at $20 per share is not relevant, as the company is not selling the stock to acquire the land, but rather using it as a form of payment. Therefore, the correct recording would be to debit Land for $200,000 and credit Common Stock for $100,000 and Paid-in Capital in Excess of Par Value for $100,000. No gain or loss should be recognized in this transaction.

A Company Acquires Land by Issuing 10,000 Shares of Its