Bluesy Company acquired land and paid for it in full by issuing $700,000 of its 10 percent bonds payable and 40,000 shares of its common stock,par $10.The stock was selling at $21 per share and the bonds were trading at 102.What amount should Bluesy record as the cost of the land?
A) $1,100,000
B) $1,540,000
C) $1,554,000
D) $1,604,000

Question

Quizplus · Accepted Answer

The cost of the land is the fair value of the consideration given. 
The fair value of the bonds payable = $700,000 x 102% = $714,000
The fair value of the common stock = 40,000 shares x $21 = $840,000
Total fair value of consideration given = $714,000 + $840,000 = $1,554,000. 
Therefore, the cost of the land is $1,554,000.

Bluesy Company Acquired Land and Paid for It in Full