Question

70. S Corporation offered to issue 5,000 shares of its no par value common shares to another company in exchange for a building at a time when there were 1,000,000 shares already outstanding and were selling for $4.00 per share at the time. The owner of the building had the opportunity to sell it to a competing buyer for $26,000. However, because the seller wanted the S Corporation shares, S's offer was accepted. At what amount should the building be reported in S's financial statements? A. $26,000 B. $10,000 C. $20,000 D. $16,000 71. C Corporation exchanged 20,000 shares of its nonconvertible preferred shares for land owned by B Corporation. A competing buyer previously had offered S150,000 cash for the land. Because of tax consequences, the cash offer was not accepted and the lot was exchanged for the shares. C Corporation previously had sold only 100 shares of its preferred shares at S9 per share several months ago. Based on the cost principle, at what amount should the land be reported on C's financial statements? A. $180,000 B. $165,000 C. $150,000 D. $160,000 72. The list price ofa new van was $30,000 at a local car dealership. However, a customer convinced the dealer to sell the van for $25,000 (the van had cost the dealer $20,000 one year earlier). The van would cost the dealer $24,000 today. Inflation is 5 % per year. The amount of profit that would be recognized by the dealer as a result of the sale using the nominal dollar approach is: A. $10,000 B. $2,500 C. $5,000 D. $6,000

Answer 1

ANSWER
70	C. $20,000	(Cost of Building = 5000*$4)
71	A. $180000	(20000 SHARES * $9)
72	C. $5,000	(STOCK OF CAR IS VALUED AT COST OR NRV WHICHEVER IS LOWER IE $20,000
		AND SOLD FOR $25000. PROFIT ON SALE = $5000)