When a Closely Held Corporation Issues Preferred Shares for Land

question 3

Multiple Choice

When a closely held corporation issues preferred shares for land, the land should be recorded at the

• A) total value of the shares issued.
• B) total book value of the shares issued.
• C) total liquidating value of the shares issued.
• D) fair market value of the land.

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Definitions:

Future Cash Inflows

Expected cash receipts or revenues generated from business activities in future periods.

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s cost.

Internal Rate of Return

The metric used to estimate the profitability of potential investments, calculated as the discount rate that makes the net present value of all cash flows equal to zero.

Cash Outlay

The total amount of cash that is spent by a business or organization for certain purposes or activities, including investments or expenses.