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On January 2 of the current year, BC Co. acquired 1,000 shares of its $10 par...

On January 2 of the current year, BC Co. acquired 1,000 shares of its $10 par value common stock for $20,000. On July 1, BC exchanged this stock for land to be held for use as the site of the corporate headquarters. The stock had a fair value of $25 per share on that date. The building on the site was razed, and BC sold the scrap for $2,000. At what amount should the land be capitalized?

A) $25,000

B) $23,000

C) $20,000

D) $18,000

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Answer #1

BC Co. exchanged the stock acquired for $20,000 for Land.

The building on the site was razed, and BC sold the scrap for $2,000.

Land should be capitalized for = Cost price of stock issued - Scrap value of building

= 20,000 - 2,000

= $18,000

Correct option is (D)

Kindly comment if you need further assistance. Thanks

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