uestion 1 s an auditor for the CPA firm of Hinkson and Calvert, you encounter th
ID: 2594495 • Letter: U
Question
uestion 1 s an auditor for the CPA firm of Hinkson and Calvert, you encounter the following situations in auditing different clients. Blue Spruce Corp. is a dosely held corporation whose stock is not publicly traded. On December 5 the corporation acquired land by issuing 3 500 shares of its $19 par value common stock. The owners' asking price for the land was $133,500, and the fair value of the land was $119,000. the time of the exchange, the land was advertised for sale at $273,000. The stock was selling at $12 per share. . Sandhil Co. is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 19,000 shares of its $11 par value stock. At wheh amount is entered. Do not Indent manually. Ir no entry Is required, select "No Entry for the account titles and enter O for the amounts) Credit 2.Explanation / Answer
the following are the required journal entries:
note: an asset acquired in exchange of shares must be recorded at the fair value of asset acquired, if ii is determinable.(similar to situation 1).
In case the fair value of asset acquired is not easily determinable, then the asset must be recorded at the fair value of shares issued.(similar to situation 2)
No. Dates Account tiltes Debit Credit 1 December 5 Land a/c $119,000 .......To Common stock a/c $66,500 ........To Additional paid in capital $52,500 (being land of $119,000 fair value acquired) 2 June 1 Land a/c $228,000 .... ...........To Common stock a/c $209,000 ... ...........To Additional paid in capital a/c $19,000 ( (being land acquired but fair value not known, recorded at fair value of shares given up)Related Questions
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