Softle Corporation is a privately owned corporation that sells exercise equipment. During the year, the company entered
Question:
Softle Corporation is a privately owned corporation that sells exercise equipment. During the year, the company entered into a strategic partnership with an entrepreneur looking to work with a bigger brand. As part of the arrangement, Softle Corporation issued 30,000 common shares in exchange for a large order of inventory. The fair value of the inventory is $490,000.
Case A Assume that Softle Corporation was recently valued at 7,520,000. The appraisal was done as part of a loan application, by an independent appraiser. Prior to the above transactions, the company had 470,000 shares outstanding.
Case B Assume that Softle did not have a valuation performed, and the fair value of the company could not be established. The existing shareholders purchased shares in the company for $10 per share; however, no new shares have been issued in the past 5 years.
Required:
Prepare a discussion of the accounting requirements, including any journal entries under ASPE for Cases A and B.
Step by Step Answer:
Intermediate Accounting Volume 2
ISBN: 9781260881240
8th Edition
Authors: Thomas H. Beechy, Joan E. Conrod, Elizabeth Farrell, Ingrid McLeod-Dick, Kayla Tomulka, Romi-Lee Sevel