Question

Suppose Girard Company acquires some equipment from dijon Company in exchange for issuance of 15,000 shares...

Suppose Girard Company acquires some equipment from dijon Company in exchange for issuance of 15,000 shares of Girard's common stock. The equipment was carried on dijon's book at the $525,000 original cost less accumulated depreciation of $250,000. Girard's stock actively trades and has a current market value of $35 per share. Its par value is $1 per share.

Requirements

1 By using the balance sheet equation, show the effects of the transaction of the accounts of girard company and dijon company.

2. Show the journal entries on the book of Girard Company and Dijon Company.

Homework Answers

Answer #1

1)IN BOOKS OF GIRARD COMPANY :

ASSET = LIABILITIES + EQUITY
+525000 +525000

2)In books of DIJON COMPANY

ASSET = LIABILITIES + EQUITY

+ 250000

+250000Gain

Net Effect On asset = +525000 Shares received -275000Book value of asset given

                         = 250000

2)

IN BOOKS OF GIRARD COMPANY :

Date Account title Debit credit
Equipment (15000*35) 525000
Common stock (15000*1) 15000
Paid in capital in excess of par value -common stock 510000

In books of DIJON COMPANY

Date Account title Debit credit
Shares of Girard's company 525000
Accumulated depreciation 250000
Gain on Exchange of asset 250000
Equipment 525000
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