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.
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.
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