Professional Documents
Culture Documents
645873
645873
Land
Buildings
Equipment
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
2. Arawak 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
3. Ace 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
4. Paunee 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. Mohegan 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
Instructions
Prepare the entry that should have been made at the date of each acquisition.
Book Values Appraisal Values Answer 1
$200,000 150000 Appraisal Values
230,000 350,000 Land $ 150,000
300,000 300,000 Buildings $ 350,000
Equipment $ 300,000
150,000 $ 800,000
230,000
300,000 JOURNAL ENTRY
680,000 Land $ 127,500
Buildings $ 297,500
27,300 Equipment $ 255,000
2,000 Cash
23,000
2,300 Answer 2
Equipment $ 250,000
20,000 Cash
19,600 Notes Payable
400
Answer 3
740,000 Equipment $ 20,000
600,000 Accounts Payable
140,000
Discount will be recorded at the time of payment
Answer 4
The land will be recorded at fair value and credit will be donated capital as it ha
Land $ 27,000
Donated Capital
Answer 5
Buildings $ 600,000
Cash
Warehouse will be recorded at the cost at which it is built.
Proportion Purchase cost
18.75% ($ 150,000/$ 800,000 * 100) $ 127,500 (18.75 % * $ 680,000)
43.75% ($ 350,000/$ 800,000 * 100) $ 297,500 (43.75 % * $ 680,000)
$ 680,000
$ 2,000
$ 23,000
$ 20,000
$ 27,000
$ 600,000