Exercise NO: 6

Plant acquisitions for selected companies are as follows.\n1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company,

Plant acquisitions for selected companies are as follows.

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1. Belanna Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co.,for a lump-sum price of $700,000. At the time of purchase, Torres’s assets had the following book and appraisal values.

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Book Values Appraisal Values

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Land $200,000 $150,000

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Buildings 250,000 350,000

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Equipment 300,000 300,000

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To be conservative, the company decided to take the lower of the two values for each asset acquired.

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The following entry was made.

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Land 150,000

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Buildings 250,000

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Equipment 300,000

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Cash 700,000

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2. Harry Enterprises purchased store equipment by making a $2,000 cash down payment and signing

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a 1-year, $23,000, 10% note payable. The purchase was recorded as follows.

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Equipment 27,300

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Cash 2,000

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Notes Payable 23,000

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Interest Payable 2,300

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3. Kim 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:

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Equipment 20,000

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Cash 19,600

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Purchase Discounts 400

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4. Kaisson 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.

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5. Zimmerman Company built a warehouse for $600,000. It could have purchased the building for $740,000. The controller made the following entry.

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Buildings 740,000

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Cash 600,000

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Profit on Construction 140,000

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Instructions

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Prepare the entry that should have been made at the date of each acquisition.

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