Intermediate Accounting 14th Edition

Published by Wiley
ISBN 10: 0470587237
ISBN 13: 978-0-47058-723-2

Chapter 2 - Conceptual Framework for Financial Reporting - Exercises - Page 74: E2-10c

Answer

This entry is inappropriate because it uses the par value of the stock with the acquired assets.

Work Step by Step

For more accurate accounting, the acquired assets should have been recorded using the market value of the assets or the stock. Par value is barely a uninformed amount decided during incorporation of the company. However, it should be noted that this transaction does not violate the historical cost principle.
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