(Learning Objective 2: Issuing stock to finance the purchase of assets) This Short Exercise demonstrates the similarity and the difference between 2 ways to acquire plant assets.
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Case A—Issue stock and buy the assets in separate transactions: |
Case B—Issue stock to acquire the assets in a single transaction: |
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Longview Corporation issued 10,000 shares of its $5 par common stock for cash of $200,000. In a separate transaction, Longview used the cash to purchase a building for $160,000 and equipment for $40,000. Journalize the 2 transactions. |
Tyler Corporation issued 10,000 shares of its $5 par common stock to acquire a building valued at $160,000 and equipment worth $40,000. Journalize this transaction. |
Compare the balances in all the accounts after making both sets of entries. Are the account balances the same or different?