This exercise shows the similarity and the difference between two ways to acquire plant assets. Case AIssue
Question:
This exercise shows the similarity and the difference between two ways to acquire plant assets.
Case A—Issue stock and buy the assets in separate transactions:
Arthur, Inc., issued 14,000 shares of its $10 par common stock for cash of $600,000. In a separate transaction, Arthur, Inc., purchased a building for $525,000 and equipment for $75,000. Journalize the two transactions.
Case B—Issue stock to acquire the assets:
Arthur, Inc., issued 14,000 shares of its $10 par common stock to acquire a building with a fair market value of $525,000 and equipment with a fair market value of $75,000. Journalize this single transaction.
Compare the balances in all accounts after making both sets of entries. Are the account balances similar or different?
Common StockCommon stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
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