Plant acquisitions for selected companies are as follows:1. Sandhill Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $720,000. At the time of purchase, Torres’s assets had the following book and appraisal values: Book Value Appraisal ValueLand $210,000 $140,000Buildings 248,000 349,000Equipment 332,000 332,000Sandhill Industries decided to take the lower of the two values for each asset it acquired. The following entry was made:Land 140,000 Buildings 248,000 Equipment 332,000 Cash 720,000Sandhill Industries expects the building structure to last another 20 years; however, it expects that it will have to replace the roof in the next five years. Torres Co. indicated that, on initial construction of the building, the roof amounted to 20% of the cost of the building. Because of the unique design and materials needed to replace the roof, the contractors stated that the roof structure is currently worth 16% of the value of the building purchase. 2. Hari Enterprises purchased equipment by making a $1,700 cash down payment and signing a $28,700, one-year, 12% note payable. The purchase was recorded as follows:Equipment 33,844 Cash 1,700 Notes Payable 28,700 Interest Payable 3,444 3. Kim Company purchased equipment for $26,300, 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 26,300 Cash 25,774 Purchase Discounts 526 4. Kaiser Inc. recently received land at zero cost from the Village of Chester as an inducement to locate its business in the village. The land’s appraised value was $32,900. The company made no entry to record the land because it had no cost basis. 5. Zimmerman Company built a warehouse for $599,000. It could have contracted out and purchased the building for $753,000. The controller made the following entry:Buildings 753,000 Cash 599,000 Sales Revenue 154,000 Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)No.Account Titles and ExplanationDebitCredit1. 2. 3. 4. 5. Prepare the correcting entry that is required in each case to correct the accounts. In other words, do not simply reverse the incorrect entry and replace it with the entry in the part above. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)No.Account Titles and ExplanationDebitCredit1. 2. 3. 4. 5.

Journal entries is the process of recording the business transaction into accounting booksand in…

Answered: Plant acquisitions for selected…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Plant acquisitions for selected companies are as follows:

Sandhill Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $720,000. At the time of purchase, Torres’s assets had the following book and appraisal values:

	Book Value	Appraisal Value
Land	$210,000	$140,000
Buildings	248,000	349,000
Equipment	332,000	332,000

Sandhill Industries decided to take the lower of the two values for each asset it acquired. The following entry was made:

Land		140,000
Buildings		248,000
Equipment		332,000
	Cash		720,000

Sandhill Industries expects the building structure to last another 20 years; however, it expects that it will have to replace the roof in the next five years. Torres Co. indicated that, on initial construction of the building, the roof amounted to 20% of the cost of the building. Because of the unique design and materials needed to replace the roof, the contractors stated that the roof structure is currently worth 16% of the value of the building purchase.

Hari Enterprises purchased equipment by making a $1,700 cash down payment and signing a $28,700, one-year, 12% note payable. The purchase was recorded as follows:

Equipment		33,844
	Cash		1,700
	Notes Payable		28,700
	Interest Payable		3,444

Kim Company purchased equipment for $26,300, 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		26,300
	Cash		25,774
	Purchase Discounts		526

Kaiser Inc. recently received land at zero cost from the Village of Chester as an inducement to locate its business in the village. The land’s appraised value was $32,900. The company made no entry to record the land because it had no cost basis.

Zimmerman Company built a warehouse for $599,000. It could have contracted out and purchased the building for $753,000. The controller made the following entry:

Buildings		753,000
	Cash		599,000
	Sales Revenue		154,000

Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)

No.	Account Titles and Explanation	Debit	Credit
1.




2.


3.

4.

5.

Prepare the correcting entry that is required in each case to correct the accounts. In other words, do not simply reverse the incorrect entry and replace it with the entry in the part above. (Credit account titles are automatically indented when the 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. Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)

No.	Account Titles and Explanation	Debit	Credit
1.




2.

3.



4.

5.

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