Plant acquisitions for selected companies are as follows. 1. Belanna Industries
ID: 2455062 • Letter: P
Question
Plant acquisitions for selected companies are as follows.
1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $1,002,400. At the time of purchase, Torres’s assets had the following book and appraisal values.
Book Values
Appraisal Values
Land
$286,400
$214,800
Buildings
358,000
501,200
Equipment
429,600
429,600
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land
214,800
Buildings
358,000
Equipment
429,600
Cash
1,002,400
2. Harry Enterprises purchased store equipment by making a $2,864 cash down payment and signing a 1-year, $32,936, 10% note payable. The purchase was recorded as follows.
Equipment
39,094
Cash
2,864
Notes Payable
32,936
Interest Payable
3,294
3. Kim Company purchased office equipment for $20,100, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Equipment
20,100
Cash
19,698
Purchase Discounts
402
4. Kaisson Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $38,664. The company made no entry to record the land because it had no cost basis.
5. Zimmerman Company built a warehouse for $859,200. It could have purchased the building for $1,059,680. The controller made the following entry.
Buildings
1,059,680
Cash
859,200
Profit on Construction
200,480
Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
No.
Account Titles and Explanation
Debit
Credit
1.
2.
3.
4.
5.
Plant acquisitions for selected companies are as follows.
1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $1,002,400. At the time of purchase, Torres’s assets had the following book and appraisal values.
Book Values
Appraisal Values
Land
$286,400
$214,800
Buildings
358,000
501,200
Equipment
429,600
429,600
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land
214,800
Buildings
358,000
Equipment
429,600
Cash
1,002,400
2. Harry Enterprises purchased store equipment by making a $2,864 cash down payment and signing a 1-year, $32,936, 10% note payable. The purchase was recorded as follows.
Equipment
39,094
Cash
2,864
Notes Payable
32,936
Interest Payable
3,294
3. Kim Company purchased office equipment for $20,100, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Equipment
20,100
Cash
19,698
Purchase Discounts
402
4. Kaisson Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $38,664. The company made no entry to record the land because it had no cost basis.
5. Zimmerman Company built a warehouse for $859,200. It could have purchased the building for $1,059,680. The controller made the following entry.
Buildings
1,059,680
Cash
859,200
Profit on Construction
200,480
Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
No.
Account Titles and Explanation
Debit
Credit
1.
2.
3.
4.
5.
Plant acquisitions for selected companies are as follows.
1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $1,002,400. At the time of purchase, Torres’s assets had the following book and appraisal values.
Book Values
Appraisal Values
Land
$286,400
$214,800
Buildings
358,000
501,200
Equipment
429,600
429,600
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land
214,800
Buildings
358,000
Equipment
429,600
Cash
1,002,400
2. Harry Enterprises purchased store equipment by making a $2,864 cash down payment and signing a 1-year, $32,936, 10% note payable. The purchase was recorded as follows.
Equipment
39,094
Cash
2,864
Notes Payable
32,936
Interest Payable
3,294
3. Kim Company purchased office equipment for $20,100, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Equipment
20,100
Cash
19,698
Purchase Discounts
402
4. Kaisson Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $38,664. The company made no entry to record the land because it had no cost basis.
5. Zimmerman Company built a warehouse for $859,200. It could have purchased the building for $1,059,680. The controller made the following entry.
Buildings
1,059,680
Cash
859,200
Profit on Construction
200,480
Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round answers to 0 decimal places, e.g. 5,275.)
No.
Account Titles and Explanation
Debit
Credit
1.
2.
3.
4.
5.
Book Values
Appraisal Values
Land
$286,400
$214,800
Buildings
358,000
501,200
Equipment
429,600
429,600
Explanation / Answer
1) For bankrupt company following revaluation entries shall be made-
a) Revaluation Loss A/C Dr 71600
To Land A/C 71600
( Being land revalued at $214800)
b) Building A/C Dr. 143200
To Revaluation profit A/C 143200
( being building revalued)
when Belanna Industries acquired bnkrupt company foloowing entry shall be made -
Land A/C Dr 286400
Building A/C Dr 358000
Equipment A/C Dr 429600
To Capital Reserve A/C 71600
To Belanna Industries 1002400
(being company acquired at lumpsum amount)
2) At the time of aquisition-
Equipment A/C Dr 35800
To Cash 2864
To Notes Payable 32936
( being equipment purchased and $2864 down payment made)
At the year end
Profit and loss A/C Dr. 3294
To interest payable A/C 3294
(being interest of equipment ( $32,936 *10%)charged to profit and loss account at year end
Interest paid A/C Dr. 3294
To Bank A/C 3294
(being interest paid)
3) Equipment A/C Dr. 20100
To Cash A/C 19698
To Discount on purchase 402
(being equipment purchased on discount)
4) when some fixed asset is acquired free of cost it shall be taken in books as per its FAIR MARKET VALUE
therefore, Kaisson Inc shall pass entry for acquisition of land at its appraisal value i.e. $38664
5) when company purchases building -:
Building A/C Dr. 1059680
To Bank A/C 1059680
(being building purchased)
when company constructs warehouse -:
Warehouse A/C Dr. 859200
To Bank A/C 859200
(being warehouse constructed)
company would have saved $200480 if it would have constructed warehouse instead of purchasing building.