Exercise 10-13 Presented below is information related to Zonker Company. 1. On J

Question

Exercise 10-13

Presented below is information related to Zonker Company.

1. On July 6, Zonker Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is:

$440,980

1,297,000

Zonker Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a fair value of $183 per share on the date of the purchase of the property.

2. Zonker Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building. (Prepare consolidated entry for all transactions below.)

3. On December 20, the company paid cash for equipment, $288,200, subject to a 1% cash discount, and freight on equipment of $10,830.

Prepare entries on the books of Zonker Company for these transactions. (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.

Cancel

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$440,980

1,297,000

Explanation / Answer

Land                                     388,875

    Building                                  1,143,750

    Machinery and Equipment             754,875

             Common Stock (12,500 x $ 100)                     1,250,000

             Paid-in Capital in Excess of Par            1,037,500  

                  ($ 2,287,500 – $ 1,250,000 = $ 1,037,500)   

(The cost of the plant assets is $ 2,100,000, or 12,500 x $183.)

The cost of the property, plant and equipment is $2,100,000 ($12,500 X $168). This cost is allocated based on appraisal values as follows

Land =( 440,91,297,00080/2,594,00)*2,287,500 = $388,875

Building = (1,297,000/2,594,000)*2,287,500 = $1,143,750

MAchinery and Equipment = (856,020/2,594,000)*2,287,500 = $754,875

2. Buildings ($ 107,000 plus $ 141,800)      248,800

    Machinery and Equipment                  137,100

    Land Improvements                              169,700

    Land                                            18,600

              Cash                                                  574,200

3. Machinery and Equipment           293,266

              Cash                                                293,266   

                   ($ 10,830 + $ 282,436, which is 98 % of $ 288,200.)

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