Companies Should Record Shares Issued for Services or Noncash Property

question 56

True/False

Companies should record shares issued for services or noncash property at either the fair value of the shares issued or the fair value of the consideration received.

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.

External Costs

Costs generated by a production or consumption activity that are not borne by the producer or consumer but by society at large.

Transaction Costs

Costs associated with the process of buying and selling, including search and information costs, bargaining costs, and enforcement costs.

Coase Theorem

A theory that suggests that if property rights are well-defined and transaction costs are low, externalities will be efficiently resolved through bargaining between parties.