This exercise shows the similarity and the difference between two ways to acquire plant assets.
Case A—Issue shares and buy the assets in separate transactions:
Atar, Inc. issued 10,000 common shares for cash of $700,000. In a separate transaction, Atar, Inc. purchased a building for $500,000 and equipment for $200,000. Journalize the two transactions.
Case B—Issue shares to acquire the assets:
Atar, Inc. issued 10,000 common shares to acquire a building valued at $500,000 and equipment worth $200,000. Journalize this single transaction.
Compare the balances in all accounts after making both sets of entries. Are the account balances similar or different?