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W2 Individual Assignment E15-3

W2 Individual Assignment E15-3 - One possible alternative...

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E15-3 (Stock Issued for Land) Twenty-five thousand shares reacquired by Elixir Corporation for $53 per share were exchanged for undeveloped land that has an appraised value of $1,700,000. At the time of the exchange the common stock was trading at $62 per share on an organized exchange. Instructions (a) Prepare the journal entry to record the acquisition of land assuming that the purchase of the stock was originally (b) Briefly identify the possible alternatives (including those that are totally unacceptable) for quantifying the cost of the land and briefly support your choice. (a) Land 1,550,000 Treasury Stock 1,325,000 Paid-in Capital - Treasury Stock 225,000 (b) Reference: Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2007). Intermediate accounting, (12th ed.). Hoboken, NJ: John Wiley & Sons.
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Unformatted text preview: One possible alternative for quantifying the cost of the land may be to use the appraised value of the land. Another possible alternative may be to use the cost of the treasury stock. According to the text "when issuing stock for services or property other than cash, the company should record the property or services at either the fair market value of the stock issued, or the fair market value of the noncash consideration received, whichever is more clearly determinable" (Keyso, Weygandt, & Warfield, 2007, p. 753). I think that the trading price of the stock is a better measurement because it is a market value rather than an appraisal....
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