Question

Exercise 10-6 Plant acquisitions for selected companies are as follows. 1. Pearl Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $784,000. At the time of purchase, Torres’s assets had the following book and appraisal values. Book Values Appraisal Values Land $224,000 $168,000 Buildings 280,000 392,000 Equipment 336,000 336,000 To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made. Land 168,000 Buildings 280,000 Equipment 336,000 Cash 784,000 2. Martinez Enterprises purchased store equipment by making a $2,240 cash down payment and signing a 1-year, $25,760, 10% note payable. The purchase was recorded as follows. Equipment 30,576 Cash 2,240 Notes Payable 25,760 Interest Payable 2,576 3. Sandhill Company purchased office equipment for $20,400, 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 20,400 Cash 19,992 Purchase Discounts 408 4. Teal 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 $30,240. The company made no entry to record the land because it had no cost basis. 5. Flint Company built a warehouse for $672,000. It could have purchased the building for $828,800. The controller made the following entry. Buildings 828,800 Cash 672,000 Profit on Construction 156,800 Prepare the entry that should have been made at the date of each acquisition. (Round intermediate calculations to 5 decimal palces, e.g. 0.56487 and final answers to 0 decimal places, e.g. 5,275. 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. 4. 5.

Answer 1

Trans	Accounts Title	Dr	Cr
1	Land	$147,000
	Buildings	$343,000
	Equipment	$294,000
	Cash		$784,000
		Appraised value	%	amt to be allocated	Allocated
	Land	168000	18.75	784000	147000
	Buildings	392000	43.75	784000	343000
	Equipment	336000	37.5	784000	294000
		896000
2	Store equiment	$27,760
	Cash		$2,000
	Notes Payable		25760
3	Office equiment	19992
	Accounts Payable		19992
4	Land	30240
	Deferred Grant Revenue		30240
5	Warehose	672000
	Cash		672000
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