Smith Company Exchanges Assets to Acquire a Building

question 115

Multiple Choice

Smith Company exchanges assets to acquire a building.The market price of the Smith stock on the exchange date was $35 per share and the building's book value on the books of the seller was $250,000. Which of the following is incorrect for Smith Company when Smith issues 10,000 shares of $10 par value common stock and pays $20,000 cash in exchange for the building?

• A)The common stock account increases by $100,000.
• B)The building account increases by $370,000.
• C)Stockholders' equity increases $350,000.
• D)The additional paid-in capital account increases by $100,000.

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Definitions:

Analogies

Comparisons made between different things to highlight their similarities, often used in reasoning and argumentation to illustrate a point or explain a concept.

Potential Opportunities

Possible circumstances or developments that offer the chance for progress or success.

Practical Constraints

Limitations arising from real-world conditions that affect the feasibility of a project or action.

Decision Maker

An individual or group responsible for making choices that determine the course of actions in various situations or organizations.