Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and sold for $15 per share. At what amount should the building be recorded by Kansas Company?

Question

Business

Chump

11 September, 08:56

Kansas Company acquired a building valued at $210,000 for property tax purposes in exchange for 12,000 shares of its $5 par common stock. The stock is widely traded and sold for $15 per share. At what amount should the building be recorded by Kansas Company?

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Answers (1)

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Zackary Powell · Answer 1

The amount at which the building is recorded in the books is $180,000

Explanation:

The amount on which the building is to be reported in the books of the Company is as:

Value of the building = Market price of the shares x Number of shares exchanged

where

Market price of the shares is $15

Number of shares exchanged = 12,000

Putting the values above:

= $15 x 12,000

= $180,000

Note: The amount would be $180,000 because it is in exchange of the shares is purchased. So, in order to nil the shares the, this value is recorded not $210,000.

Value of the building = Market price of the shares x Number of shares exchanged = $15 x 12,000 = $180,000