on feb 1 216 xexler corp issued 50,000 shares of its nopar comman stock in excha
ID: 2481400 • Letter: O
Question
on feb 1 216 xexler corp issued 50,000 shares of its nopar comman stock in exchange for fie acres of land located in thecity of monrovia on the date of the aqcusition xilons common stock had a fair value of 18 per share a office building was constucted on the site by independent contractor the building was completed on nov 2 2016 at a cost of 6,000,000 xilon paid 4,000,000 in cash and the remainder was paidby the city of monrovia
required
1 prepare a journal entry to record the acquisition of the land and the building
2. assuming that xilon prepars its financial statements according to international financial reporting standards,explain the alternitives the company has for recording the acqustition of the office building.
Explanation / Answer
Date Accounts Title Dr Cr 01, Feb 2016 Land $900,000 Common Stock (50000*$18) 900000 (Being issue of commom stock as consideration for land) Nov 2,2016 Building 6000000 Cash 4000000 Revenue- Donantion of Asset 2000000 (Being office building contructed) Ans 2 IFRS requires that the value of the donated assets should be valued by company at fair value IFRs requires that the grants from government should be recognized in income over all those period which are necessary to match with related cost on a systematic basis that they intend to compensate So office building part which has received as donation of $200000 should not be recognized as the revenue for whole amount in one period only but could be spread to no. of periods.
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