Exercise 10-6 Plant acquisitions for selected companies are as follows. 1. Pearl
ID: 2404030 • Letter: E
Question
Exercise 10-6 Plant acquisitions for selected companies are as follows. 1. Pearl Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $784,000. At the time of purchase, Torres’s assets had the following book and appraisal values. Book Values Appraisal Values Land $224,000 $168,000 Buildings 280,000 392,000 Equipment 336,000 336,000 To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made. Land 168,000 Buildings 280,000 Equipment 336,000 Cash 784,000 2. Martinez Enterprises purchased store equipment by making a $2,240 cash down payment and signing a 1-year, $25,760, 10% note payable. The purchase was recorded as follows. Equipment 30,576 Cash 2,240 Notes Payable 25,760 Interest Payable 2,576 3. Sandhill 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: Equipment 20,400 Cash 19,992 Purchase Discounts 408 4. Teal 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 $30,240. The company made no entry to record the land because it had no cost basis. 5. Flint Company built a warehouse for $672,000. It could have purchased the building for $828,800. The controller made the following entry. Buildings 828,800 Cash 672,000 Profit on Construction 156,800 Prepare the entry that should have been made at the date of each acquisition. (Round intermediate calculations to 5 decimal palces, e.g. 0.56487 and final answers to 0 decimal places, e.g. 5,275. 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.) No. Account Titles and Explanation Debit Credit 1. 2. 3. 4. 5.
Explanation / Answer
Trans Accounts Title Dr Cr 1 Land $147,000 Buildings $343,000 Equipment $294,000 Cash $784,000 Appraised value % amt to be allocated Allocated Land 168000 18.75 784000 147000 Buildings 392000 43.75 784000 343000 Equipment 336000 37.5 784000 294000 896000 2 Store equiment $27,760 Cash $2,000 Notes Payable 25760 3 Office equiment 19992 Accounts Payable 19992 4 Land 30240 Deferred Grant Revenue 30240 5 Warehose 672000 Cash 672000 If any doubt please comment
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