QUESTION ONE RJD Corporations had the following authorized capital on December 31, 2020: 10,000 shares of $100 par value, 8% cumulative and non-participating preference shares 50,000 shares of $10 par value ordinary shares. The following transactions took place during 2021: Jan 4 Issued 25,000 ordinary shares at $15 per share Mar 1 Received a piece of equipment valued at $132,000; a piece of land with fair value of $400,000 and machinery valued at $118,000 in exchange for 5,000 preference shares. Jun 20 Purchased 1,500 ordinary shares at $17 per share. (Use cost method.) Aug 1 Sold the 1,500 treasury shares at $16 per share. Dec 31 Declared a $0.40 per share cash dividend on the ordinary shares and declared the preference dividend. Dec 31 Closed the Income Summary account. There was $250,000 net income. Requirements: (c) What general rule should be applied to determine the amount at which the land should be recorded? (d) Explain why treasury shares are not classified as an asset.
QUESTION ONE
RJD Corporations had the following authorized capital on December 31, 2020:
10,000 shares of $100 par value, 8% cumulative and non-participating
50,000 shares of $10 par value ordinary shares.
The following transactions took place during 2021:
Jan 4 Issued 25,000 ordinary shares at $15 per share
Mar 1 Received a piece of equipment valued at $132,000; a piece of land with
fair value of $400,000 and machinery valued at $118,000 in exchange for
5,000 preference shares.
Jun 20 Purchased 1,500 ordinary shares at $17 per share. (Use cost method.)
Aug 1 Sold the 1,500 treasury shares at $16 per share.
Dec 31 Declared a $0.40 per share cash dividend on the ordinary shares and
declared the preference dividend.
Dec 31 Closed the Income Summary account. There was $250,000 net income.
Requirements:
(c) What general rule should be applied to determine the amount at which the land should be
recorded?
(d) Explain why treasury shares are not classified as an asset.
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