Accounting help 2?

Question:

A company acquired land in exchange for 10,000 shares of its $10 par common stock. The fair market value of the land is not determinable, but the stock widely traded and was selling at $25 per share when exchanged for land. At what amount should the land be recorded by the company?

Answer:
An asset's book value is generally its acquisition cost less depreciation. A depreciation schedule is established at the time the asset is acquired. Assets, such as land or precious metals, which do not wear out over time, are not depreciated. Their book value is typically just their acquisition cost. If the company acquired if for 10,000 shares of $10, then they would record $100,000. If they sold the land at for $250,000 they would then record a gain.

The fair market value of the stock would have to be applied to the land. The transaction would be recorded as follows:

Dr. Land 250,000
Cr. Common Stock 100,000
Cr. Additional Paid in Capital 150,000

Accounting help 2?

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