Questions: C H Corporation has 10,000 share of 10 par value stock authorized. It issues 2000 shares to John Deere Equipment for a tractor priced at 25,000. On that date the stock was trading for 12 per share. The tractor would be recorded at (A) 20,000 (B) 24,000 (C) 25,000 (D) 29,000

C H Corporation has 10,000 share of 10 par value stock authorized. It issues 2000 shares to John Deere Equipment for a tractor priced at 25,000. On that date the stock was trading for 12 per share. The tractor would be recorded at (A) 20,000 (B) 24,000 (C) 25,000 (D) 29,000
Transcript text: C \& H Corporation has 10,000 share of $\$ 10$ par value stock authorized. It issues 2000 shares to John Deere Equipment for a tractor priced at $\$ 25,000$. On that date the stockiwas trading for $\$ 12$ per share. The tractor would be recorded at (A) $\$ 20,000$ (B) $\$ 24,000$ (C) $\$ 25,000$ (D) $\$ 29,000$
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Solution

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The answer is (C): \$25,000.

Explanation for each option:

(A) \$20,000: This option is incorrect because it does not reflect the value of the transaction. The par value of the stock is \$10, but the transaction should be recorded at the fair market value of the tractor or the stock issued, whichever is more clearly evident.

(B) \$24,000: This option is incorrect because it represents the market value of the stock issued (2000 shares * \$12 per share = \$24,000). However, the transaction should be recorded at the fair market value of the tractor, which is \$25,000.

(C) \$25,000: This option is correct because the tractor is priced at \$25,000, and this is the fair market value of the asset received. According to accounting principles, the transaction should be recorded at the fair market value of the asset received or the fair market value of the stock issued, whichever is more clearly evident. In this case, the fair market value of the tractor is more clearly evident.

(D) \$29,000: This option is incorrect because it does not reflect the value of the transaction. It seems to be an arbitrary number that does not correspond to the fair market value of the tractor or the stock issued.

Summary: The tractor would be recorded at \$25,000, which is the fair market value of the asset received in the transaction.

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