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Navajo Corporation traded a used truck (cost $21,460, accumulated depreciation $19,314) for a small computer worth $3,54

1.

Navajo also paid $

537

in the transaction.
Prepare the journal entry to record the exchange. (The exchange has commercial substance.)
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

		Account Titles and Explanation			Debit			Credit

Plant acquisitions for selected companies are presented below.
1. Natchez Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Vivace Co., for a lump-sum price of $

737,120

. At the time of purchase, Vivace’s assets had the following book and appraisal values.

Book Values

Appraisal Values

Land

$216,800

$

162,600

Building

s

249,320

379,400

Equipment

325,200

325,200

To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.

Land 162,600

Buildings

249,320

Equipment

325,200

Cash

737,120

2.

Arawak Enterprises purchased store equipment by making a $

2,168

cash

down payment and signing a 1-year, $

24,932

, 10% note payable. The purchase was recorded as follows.

Equipment

29,593

Cash 2,168

Notes Payable

24,932

Interest Payable

2,493

3.

Ace Company purchased office equipment for $

22,000

, 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

22,000
21,560
Purchase Discounts	440

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 $29,268. The company made no entry to record the land because it had no cost basis.

5.

Mohegan Company built a warehouse for $

650,400

. It could have purchased the building for $

802,160

. The controller made the following entry.

Cash

					Buildings	802,160
650,400
Profit on Construction	151,760

Prepare the entry that should have been made at the date of each acquisition.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation

Debit

Credit

1.

Land

$162,600

=

Buildings

=

$737,120 x

=

$867,200

Equipment

=

$737,120 x

=

$867,200

3.

=

=

	No.
				1.
		2.
			3.
4.
5.
																				=			$737,120 x	$138,210
		$867,200
$379,400	$322,490
$325,200	$276,420
Accounts Payable	($22,000 x 0.98)	$21,560

Presented below is information related to Rommel Company.
1. On July 6, Rommel Company acquired the plant assets of Studebaker Company, which had discontinued operations. The appraised value of the property is:

Land

Buildings

Equipment

	$434,010
1,276,500
842,490
Total				$2,553,000

Rommel Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a fair value of $187 per share on the date of the purchase of the property.
2. Rommel Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building.

Repairs to building	$105,500
Construction of bases for machinery to be installed later	142,400
Driveways and parking lots	133,200
Remodeling of office space in building, including new partitions and walls	162,900
Special assessment by city on land	18,900

3. On December 20, the company paid cash for machinery, $290,000, subject to a 2% cash discount, and freight on machinery of $10,540.
Prepare entries on the books of Rommel Company for these transactions.
(Credit account titles are automatically indented when amount is entered. Do not indent manually.)

No.

Account Titles and Explanation

Debit

Credit

1.

2.

3.

1.

Common Stock

=

(12,500 x $100)

=

$1,250,000

Paid-in Capital in E

xcess of Par—Common Stock

=

($2,337,500 – $1,250,000)

=

$1,087,500

The cost of the property, plant and equipment is $2,337,500 (12,500 x $187). This cost is allocated based on appraised values as follows:

1.

Land

=

$434,010

=

$2,553,000

=

x $2,337,500

=

$2,553,000

Equipment

=

x $2,337,500

$2,553,000

		x $2,337,500	$397,375
Building	$1,276,500	$1,168,750
$842,490	=	$771,375

2.

Buildings

=

=

3.

Cash

=

=

($105,500 + $162,900)	$268,400
($10,540 + $284,200, which is 98% of $290,000)	$294,740

(Classification of Land and Building Costs)
Spitfire Company was incorporated on January 2, 2013, but was unable to begin manufacturing activities until July 1, 2013, because new factory facilities were not completed until that date.
The Land and Building account reported the following items during 2013.

January 31

Land and building

$160,000

February 28

Cost of removal of building

9,800

May 1

Partial payment of new construction

60,000

May 1

Legal fees paid

3,770

June 1

Second payment on new construction

40,000

June 1

Insurance premium

2,280

June 1

Special tax assessment

4,000

June 30

General expenses

36,300

July 1

Final payment on new construction

30,000

December 31

Asset write-up

53,800

399,950

December 31

Depreciation-2013 at 1%

4,000

December 31, 2013

Account balance

$395,950

The following additional information is to be considered.
1. To acquire land and building the company paid $80,000 cash and 800 shares of its 8% cumulative preferred stock, par value $100 per share. Fair market value of the stock is $117 per share.
2. Cost of removal of old buildings amounted to $9,800, and the demolition company retained all materials of the building.
3. Legal fees covered the following.

Cost of organization

$

610

Examination of title covering purchase of land

1,300

Legal work in connection with construction contract

1,860

$3,770

4. Insurance premium covered the building for a 2-year term beginning May 1, 2013.
5. The special tax assessment covered street improvements that are permanent in nature.
6. General expenses covered the following for the period from January 2, 2013, to June 30, 2013.

President’s salary

$32,100

Plant superintendent covering supervision of new building

4,200

$36,300

7. Because of a general increase in construction costs after entering into the building contract, the board of directors increased the value of the building $53,800, believing that such an increase was justified to reflect the current market at the time the building was completed.

Retained earnings

was credited for this amount.
8. Estimated life of building – 50 years.
Depreciation for 2013 – 1% of asset value (1% of $400,000, or $4,000).

THE NAMES BY THE ONCE ON RED ARE ALSO WRONG.

Your answer is partially correct. Try again.

Prepare entries to reflect correct land, building, and depreciation accounts at December 31, 2013.
(Round amount for accumulated depreciation to 0 decimal places, e.g. 2,530. List multiple debit/credit entries from largest to smallest amount, e.g. 10, 5, 2.)

Description/Account

Debit

Credit

Land

Additional paid-in capital

Description/Account

Debit

Credit

Land (Schedule A)

188,700

Building (Schedule B)

136,250

Retained earnings

53,800

Salary expense

32,100

Prepaid insurance

(16 months × $95)

1,520

Organization expense

610

Insurance expense

(6 months × $95)

570

Land and building

399,950

Additional paid-in capital (800 shares × $17)

13,600

Land and building

4,000

Depreciation expense

2,637

Accumulated depreciation-Building

1,363

Schedule A

Amount consists of:

Acquisition cost [$80,000 + (800 × $117)]

$173,600

Removal of old building

9,800

Legal fees (Examination of title)

1,300

Special tax assessment

4,000

Total

$188,700

Schedule B

Amount consists of:

Legal fees (Construction contract)

$ 1,860

Construction costs (First payment)

60,000

Construction costs (Second payment)

40,000

Insurance (2 months)

[(2,280 ÷ 24) = $95 × 2 = $190]

190

Plant superintendent’s salary

4,200

Construction costs (Final payment)

30,000

Total

$136,250

Schedule C

Depreciation taken

$4,000

Depreciation that should be taken

(1% × $136,250)

(1,363)

Depreciation adjustment

$2,637

3541

397375

Buildings

1168750

Equipment

771375

Common Stock

125000

Paid-in Capital in E

1087500

Buildings

268400

Machinery

142400

Land Improvemen

133200

Land

Accumulated Dep

18900

Cash

562900

Machinery

294740

Cash
294740

19314

188700

resp_str_c10q_3

Building

136250

resp_str_c10q_3
Retained earnings

53800

Organization expense
610
Salary expense

32100

Prepaid insurance

1520

resp_str_c10q_3
Insurance expense
Cash
570
resp_str_c10q_3
Land and building

399950

13600

resp_str_c10q_3
Land and building

4000

Accumulated depreciation-Building

1363

Depreciation expense

2637

537

Trucks

21460

Contribution Reve

nue

858

Land

138210

Buildings

322490

Equipment

276420

Cash

737120

Equipment

27100

cash

2168

Notes Payable

24932

Equipment

21560

Notes Payable
21560
Land
Equipment

29268

Contribution Reve
29268
Buildings

650400

Cash
650400
Land