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 $812,000. At the time of purchase, Torresâs assets had the following book and appraisal values.
Book Values
Appraisal Values
Land $232,000 $174,000 Buildings 290,000 406,000 Equipment 348,000 348,000
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land 174,000 Buildings 290,000 Equipment 348,000 Cash 812,000
2. Martinez Enterprises purchased store equipment by making a $2,320 cash down payment and signing a 1-year, $26,680, 10% note payable. The purchase was recorded as follows.
Equipment 31,668 Cash 2,320 Notes Payable 26,680 Interest Payable 2,668
3. Sandhill Company purchased office equipment for $18,000, 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 18,000 Cash 17,640 Purchase Discounts 360
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 $31,320. The company made no entry to record the land because it had no cost basis.
5. Flint Company built a warehouse for $696,000. It could have purchased the building for $858,400. The controller made the following entry.
Buildings 858,400 Cash 696,000 Profit on Construction 162,400
Prepare the entry that should have been made at the date of each acquisition
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 $812,000. At the time of purchase, Torresâs assets had the following book and appraisal values.
| Book Values | Appraisal Values | |||||
| Land | $232,000 | $174,000 | ||||
| Buildings | 290,000 | 406,000 | ||||
| Equipment | 348,000 | 348,000 | ||||
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
| Land | 174,000 | |||
| Buildings | 290,000 | |||
| Equipment | 348,000 | |||
| Cash | 812,000 |
2. Martinez Enterprises purchased store equipment by making a $2,320 cash down payment and signing a 1-year, $26,680, 10% note payable. The purchase was recorded as follows.
| Equipment | 31,668 | |||
| Cash | 2,320 | |||
| Notes Payable | 26,680 | |||
| Interest Payable | 2,668 |
3. Sandhill Company purchased office equipment for $18,000, 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 | 18,000 | |||
| Cash | 17,640 | |||
| Purchase Discounts | 360 |
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 $31,320. The company made no entry to record the land because it had no cost basis.
5. Flint Company built a warehouse for $696,000. It could have purchased the building for $858,400. The controller made the following entry.
| Buildings | 858,400 | |||
| Cash | 696,000 | |||
| Profit on Construction | 162,400 |
Prepare the entry that should have been made at the date of each acquisition
