Question: Plant acquisitions for selected companies are
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 $680,000. At the time of purchase, Vivace’s assets had the following book and appraisal values.
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
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.
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:
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.
Instructions
Prepare the entry that should have been made at the date of each acquisition.
Transcribed Image Text:
Book Values Appraisal Values Land $200,000 $150,000 Buildings 230,000 350,000 Equipment 300,000 300,000 Land 150,000 Buildings 230,000 Equipment 300,000 Cash 680,000 Equipment 27,300 Cash 2,000 Notes Payable 23,000 Interest Payable 2,300
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