Chapter 10, Problem 3SE

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 foe $125,000 and paid cash. 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?