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taxygood
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Joined: 14 Apr 2009
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Posted: 14 Apr 2009 at 20:19 \| IP Logged

1. On December 1, Young Corporation exchanged 5,000 shares of its $25 par value common stock held in treasury for a parcel of land to be held for a future plant site. The treasury shares were acquired by Young at a cost of $40 per share, and on the exchange date the common shares of Young had a fair market value of $50 per share. Young received $9,000 for selling scrap when an existing building on the property was removed from the site. Based on these facts, the land should be capitalized at

I am confused

Which amount I have capitalized

And what about $9000

jrupa
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Posted: 14 Apr 2009 at 21:02 \| IP Logged

as per my thinking

land will be debited for the amt he paid by issuing shares -the amt received from the scrap

soo the land will be 5000 shares at 50 -9000 = 250000-9000 =241000

just correct me if i am wrong

Jams
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Posted: 14 Apr 2009 at 21:08 \| IP Logged

jrupa is absolutely right !

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utesa
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Posted: 14 Apr 2009 at 22:00 \| IP Logged

why do you need to deduct the $9,000?

so if Young receives the same amount of $$$ he receivd for selling scrap that he issued in shares you capitalized $0???

can you explain a little?

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globetrotter
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Posted: 15 Apr 2009 at 00:01 \| IP Logged

Hmm...the $9,000 proceeds from selling scrap of the building that used to be on the land where the new building is -- doesn't that go to the land account, as a deduction from the acquisition price?

The cost of razing the old building that used to be on the land to build the new building is capitalized under the Land account...so following this logic, doesn't the proceeds of selling the scrap go to the Land account as well?

IF this is the case, the cost of the Land would only be the FV of the asset given up (that is the CS @ mkt price) less the proceeds from the sale of the scrap.

Correct me if my analogy is wrong.

*** edited because I was incoherent at 5:30AM CET :)

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