On April 1, 2018, ABC Corporation exchanged 1,000 shares of its $5 par common st
ID: 2518127 • Letter: O
Question
On April 1, 2018, ABC Corporation exchanged 1,000 shares of its $5 par common stock for equipment. The stock is traded on the NYSE and on the date of the acquisition was trading at $80 per share. The equipment had a book value of $40,000 on the seller's books and a fair value of $85,000. ABC recorded the Equipment at fair value. The equipment has a 5-year life, no salvage and ABC uses the straight-line method to depreciate this class of equipment.
Determine the errors on the following financial statement components due to this error as of December 31, 2018.
( NE for No Effect. Do not use $ signs or commas and do not space between the O/U and the dollar amount. For example, if your answer is Understated for $1,000, enter your answer as U1000. )
Assets Liabilities Stockholder's Equity Net IncomeExplanation / Answer
Assets Liabilities Stockholder's Equity Net Income U45000 O75000 NE U9000 Reason (85000-40000) (5000-80000) (85000/5 - 40000/5)
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