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.