Plant acquisitions for selected companies are as follows. 1. Belanna Industries
ID: 2477035 • 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 $1,028,300. At the time of purchase, Torres’s assets had the following book and appraisal values.
Book Values
Appraisal Values
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
2. Harry Enterprises purchased store equipment by making a $2,938 cash down payment and signing a 1-year, $33,787, 10% note payable. The purchase was recorded as follows.
3. Kim Company purchased office equipment for $20,400, 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:
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 $39,663. The company made no entry to record the land because it had no cost basis.
5. Zimmerman Company built a warehouse for $881,400. It could have purchased the building for $1,087,060. The controller made the following entry.
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 $293,800 $220,350 Buildings 367,250 514,150 Equipment 440,700 440,700Explanation / Answer
Date Accounts Title Dr Cr 1 Land $192,806 Buildings $449,881 Equipment $385,613 Cash $1,028,300 (Now the land, buiding and equipmet will be divided in the ratio of appraisal value 220350*1028300/1175200 192806.25 514150*1028300/1175200 449881.25 440700*1028300/1175200 385612.5 Appraisal value Land=220350 Buildings=514150 Equipment=220350 1175200 2 Equpment 36725 Cash 2938 Notes Payable 33787 (being correct entry made interest is not due on day 1) 3 Equipment 20400 Accounts Payable 20400 (Being equipment taken on account) 4 Land 39883 Contribution Revenue 39883 5 Building 881400 Cash 881400 (Being building recorded at the price paid for it)