Answer: Please refer to Explanation
Explanation:
When recording Equipment here the value of the shares at current value should be used and not the cost of the equipment.
DR Equipment $162,250
CR Investment in Pharaoh Company $137,500
CR Gain on Exchange $24,750
(To record Exchange of shares for Equipment)
Workings.
Investment in Pharaoh Company.
= 2,750 shares * $50(purchase price)
= $137,500
Gain on Exchange
= 2,750 shares * (Market Price - Purchase Price)
= 2,750 shares * ( 59 - 50)
= $24,750
Equipment.
= Investment in Pharoah Company + Gain on Exchange
= 137,500 + 24,750
= $162,250