Capitalizable cost of equipment
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Assume the market value of equipment acquired is not determinable by reference to a similar purchase of cash. Describe how the acquiring company should determine the capitalizable cost of equipment for each of the following separate cases when it is acquired in exchange for:
(1) Bonds having an established market value
(2) Common stock not having an established market price
(3) Dissimilar equipment having a determinable market value.
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Solution Summary
The solution explains how to determine the capitalizable cost of equipment when the market value of equipment is not available.
Solution Preview
The general rule is to capitalize the asset with the fair market value of the exchange wherever it is determinable.
(1) Bonds having an established market value
Here the bonds are an established market value and so the ...
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