When MCI Communications Corporation (now part of Verizon Communications) purchased Satellite Business Systems (SBS) from International Business Machines Corporation (IBM), it issued common stock to IBM, valued at $376 million, and signed a note payable for $104 million. MCI received miscellaneous assets valued at $52 million and the SBS system.
REQUIRED:
Respond to the following:
a. At what dollar amount was the SBS system recorded on MCI's balance sheet?
b. Describe how this transaction affected the accounting equation from MCI's point of view.
c. Describe how this transaction affected MCI's balance sheet.
d. Identify the financial statement accounts affected, the direction of the effect, and the dollar amount of the effect on each account.
e. Prepare the journal entry MCI recorded when the transaction took place.