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 $700,000. At the time of purchase, Torres’s assets had the following book and appraisal values.   Book Values Appraisal Values Land Buildings Equipment $200,0000 250,0000 300,0000 $150,00000 350,00000 300,00000     To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made. Land Buildings Equipment     Cash   150,000 250,000 300,000         700,000   2.    Harry Enterprises purchased store equipment by making a $2,000 cash down payment and signing a 1-year, $23,000, 10% note payable. The purchase was recorded as follows. Equipment     Cash     Notes Payable     Interest Payable   27,300       2,000 23,000 2,300  3.    Kim Company purchased office equipment for $20,000, 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     Cash     Purchase Discounts   20,000       19,600 400    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 $27,000. The company made no entry to record the land because it had no cost basis. 5.    Zimmerman Company built a warehouse for $600,000. It could have purchased the building for $740,000. The controller made the following entry. Buildings     Cash     Profit on Construction   740,000       600,000 140,000   Instructions Prepare the entry that should have been made at the date of each acquisition.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
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 $700,000. At the time of purchase, Torres’s assets had the following book and appraisal values.

 
Book Values
Appraisal Values
Land
Buildings
Equipment
$200,0000
250,0000
300,0000
$150,00000
350,00000
300,00000

    To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.

Land
Buildings
Equipment
    Cash
 
150,000
250,000
300,000
 
 
 
 
700,000

 

2.    Harry Enterprises purchased store equipment by making a $2,000 cash down payment and signing a 1-year, $23,000, 10% note payable. The purchase was recorded as follows.

Equipment
    Cash
    Notes Payable
    Interest Payable
 
27,300
 
   
2,000
23,000
2,300 

3.    Kim Company purchased office equipment for $20,000, 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
    Cash
    Purchase Discounts
 
20,000
 
 
 
19,600
400 

 

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 $27,000. The company made no entry to record the land because it had no cost basis.

5.    Zimmerman Company built a warehouse for $600,000. It could have purchased the building for $740,000. The controller made the following entry.

Buildings
    Cash
    Profit on Construction
 
740,000
 
 
 
600,000
140,000

 

Instructions

Prepare the entry that should have been made at the date of each acquisition.

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Accounting for Property, Plant and Equipment
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education