When Stock Is Issued in Exchange for a Noncash Asset

question 140

Multiple Choice

When stock is issued in exchange for a noncash asset, the value recorded for the shares issued is best determined by

• A)the book value of the noncash asset.
• B)the market value of the shares.
• C)the par value of the shares.
• D)the contributed capital of the shares.

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Definitions:

Statement of Retained Earnings

This report outlines the fluctuation in a company’s retained earnings over a particular accounting timeframe, incorporating elements like net profits and dividend distributions.

Cash Flow Statement

A financial document summarizing the total cash received by a company from its operational activities and external investments, alongside all expenditures on operations and investments within a specific timeframe.

Equipment Account

An account on a company's balance sheet that reports the value of the company's equipment used in operations, less any accumulated depreciation.

Posting

The process of recording financial transactions in the ledger of a company as part of the accounting cycle.