In groups of four or five, consider the following information.

On 1 July 2019, Stevenson Pty Ltd, a proprietary company with three shareholders, acquired some property by issuing 100 000 shares to the owner. Prior to the acquisition, the property had been advertised for sale at $350 000. This advertised price had been based to some extent on a previous independent appraisal, obtained by the owner, of the approximate fair market value, $300 000; 20% of this value was considered to apply to the land and 80% to the buildings.

Required

(a) Discuss how the above situation should be recorded in the accounting records of the company. Write a brief memorandum to the manager explaining the reasons for the preferred method.