E10-6B (Correction of Improper Cost Entries) Plant acquisitions for selected companies are presented below.
mujionostevoE10-6B (Correction of Improper Cost Entries) Plant acquisitions for selected companies are presented below.
1. Protex Inc. acquired land, buildings, and equipment from a bankrupt company, for a lump-sum price of $700,000. At the time of purchase, the assets had the following book and appraisal values.
Book Values Appraisal Values
Land $200,000 $300,000
Buildings 450,000 250,000
Equipment 300,000 250,000
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land 200,000
Buildings 250,000
Equipment 250,000
Cash 700,000
2. Apple Industries purchased store equipment by making a $10,000 cash down payment and signinga 2-year, $40,000, 8% note payable. The purchase was recorded as follows.
Store Equipment 56,400
Cash 10,000
Note Payable 40,000
Interest Payable 6,400
3. Cherry Company purchased office equipment for $50,000, terms 1/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
Office Equipment 50,000
Cash 49,500
Purchase Discounts 500
4. Bubble Inc. recently received at zero cost land from the Village of Wellington as an inducement to locate its business in the Village. The appraised value of the land is $120,000. The company made no entry to record the land because it had no cost basis.
5. Gump Company built a factory for $750,000. It could have purchased the building for $900,000. The controller made the following entry.
Warehouse 900,000
Cash 750,000
Profit on Construction 150,000
Instructions
Prepare the entry that should have been made at the date of each acquisition.
12 years ago
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6_l.docx
