On June 30, 2017, Carter Ltd.exchanged 3,000 Butte Corp.common shares for a patent owned by Texas Corp.The Butte shares were acquired in 2015 for $160,000.At the exchange date, Butte common shares have a fair value of $90 per share, and the patent had a carrying value of $320,000 on Texas's books.Carter should record the patent at
A)$320,000.
B)$270,000.
C)$180,000.
D)$160,000.

Question

Quizplus · Accepted Answer

The fair value of the Butte shares received in exchange for the patent is 3,000 shares x $90 per share = $270,000. Since this amount is greater than the carrying value of the patent on Texas's books, Carter should record the patent on its own books at the fair value of $270,000.