Question

John Company creates a subsidiary, Mark Company. John transfers cash of $50,000, land with both a cost and book value of $75,000, and a building with a cost of $250,000 and a book value of $200,000 to Mark, in exchange for all 50,000 shares of Mark's $4 par common stock. John’s journal entry to record the transfer would include:

DR-building for $50,000.

CR-building for $200,000.

CR-building for $250,000.

CR-accumulated depreciation for $150,000.

Answer 1

Answer: CR - building $200,000

Step-by-step explanation:

John would record the value of building with book value of $200,000. The reason for that is due to depreciation the value of the building is decreased. The new value is to be realized while trading or selling. Book value is the amount after deducting depreciation. It is important to record building after subtracting the accumulated depreciation.