Homework Answers
a. When fair value of the patent is more reliable than share:-
Patent a/c Dr. $50,000
To Share Capital a/c $ 20,000
To Capital Reserve a/c $ 30,000
(Being patent is recorded at fair value and balance amount is shown as capital reserve)
b. When fair value of the share is more reliable than patent:-
Patent a/c Dr. $50,000
To Share Capital a/c $ 48,000 ( $24*2000)
To Capital Reserve a/c $ 2,000
(Being patent is recorded at fair value and balance amount is shown as capital reserve)
Assumption :- Fair Value is assumed $ 10 per share..
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