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21 February, 04:29

Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and sold for $15 per share. At what amount should the building be recorded by Kansas Company?

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  1. 21 February, 04:47
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    The amount at which the building is recorded in the books is $180,000

    Explanation:

    The amount on which the building is to be reported in the books of the Company is as:

    Value of the building = Market price of the shares x Number of shares exchanged

    where

    Market price of the shares is $15

    Number of shares exchanged = 12,000

    Putting the values above:

    = $15 x 12,000

    = $180,000

    Note: The amount would be $180,000 because it is in exchange of the shares is purchased. So, in order to nil the shares the, this value is recorded not $210,000.

    Value of the building = Market price of the shares x Number of shares exchanged = $15 x 12,000 = $180,000
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