Question

Steak Company acquired a building valued at $170,000 for property tax purposes in exchange for 10,000 shares of its $5 par common stock. The stock is widely traded and selling for $16 per share. At what amount should the building be recorded by Steak Company?

Answer 1

Answer:

$160,000

Explanation:

Data provided in the question:

Value of the building acquired = $170,000

Number of shares exchanged = 10,000

Selling price of the stocks = $16 per share

Now,

The amount for which the building will be recorded by Steak Company is the market value of the shares that has been exchanges to acquire the building.

Therefore,

The amount for which the building will be recorded by Steak Company

= Number of shares exchanged × Selling price of the stocks

= 10,000 × $16

= $160,000