Issuance of stock for cash and noncash assets (Learning Objective 3)

10–15 min.

This exercise shows the similarity and the difference between two ways to acquire plant assets.

Case A—Issue stock and buy the assets in separate transactions:

Apex, Inc., issued 10,000 shares of its $10 par common stock for cash of $600,000.

In a separate transaction, Apex, Inc. purchased a building for $475,000 and equipment for $125,000. Journalize the two transactions.

Case B—Issue stock to acquire the assets:

Apex, Inc., issued 10,000 shares of its $10 par common stock to acquire a building with a fair market value of $475,000 and equipment with a fair market value of

$125,000. Journalize this single transaction.

Compare the balances in all accounts after making both sets of entries. Are the account balances similar or different?

AppendixLO1