Plant acquisitions for selected companies are as follows: 1. Cullumber Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $692,000. At the time of purchase, Torres’s assets had the following book and appraisal values: Book Value Appraisal Value Land $219,000 $144,000 Buildings 244,000 351,000 Equipment 304,000 304,000 Cullumber Industries decided to take the lower of the two values for each asset it acquired. The following entry was made: Land 144,000 Buildings 244,000 Equipment 304,000 Cash 692,000 Cullumber Industries expects the building structure to last another 20 years; however, it expects that it will have to replace the roof in the next five years. Torres Co. indicated that, on initial construction of the building, the roof amounted to 19% of the cost of the building. Because of the unique design and materials needed to replace the roof, the contractors stated that the roof structure is currently worth 15% of the value of the building purchase. 2. Hari Enterprises purchased equipment by making a $1,600 cash down payment and signing a $28,200, one-year, 10% note payable. The purchase was recorded as follows: Equipment 32,620 Cash 1,600 Notes Payable 28,200 Interest Payable 2,820 3. Kim Company purchased equipment for $21,600, terms 4/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was: Equipment 21,600 Cash 20,736 Purchase Discounts 864 4. Kaiser Inc. recently received la

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Plant acquisitions for selected companies are as follows:

Cullumber Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $692,000. At the time of purchase, Torres’s assets had the following book and appraisal values:

	Book Value	Appraisal Value
Land	$219,000	$144,000
Buildings	244,000	351,000
Equipment	304,000	304,000

Cullumber Industries decided to take the lower of the two values for each asset it acquired. The following entry was made:

Land		144,000
Buildings		244,000
Equipment		304,000
	Cash		692,000

Cullumber Industries expects the building structure to last another 20 years; however, it expects that it will have to replace the roof in the next five years. Torres Co. indicated that, on initial construction of the building, the roof amounted to 19% of the cost of the building. Because of the unique design and materials needed to replace the roof, the contractors stated that the roof structure is currently worth 15% of the value of the building purchase.

Hari Enterprises purchased equipment by making a $1,600 cash down payment and signing a $28,200, one-year, 10% note payable. The purchase was recorded as follows:

Equipment		32,620
	Cash		1,600
	Notes Payable		28,200
	Interest Payable		2,820

Kim Company purchased equipment for $21,600, terms 4/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:

Equipment		21,600
	Cash		20,736
	Purchase Discounts		864

Kaiser Inc. recently received land at zero cost from the Village of Chester as an inducement to locate its business in the village. The land’s appraised value was $31,300. The company made no entry to record the land because it had no cost basis.

Zimmerman Company built a warehouse for $586,000. It could have contracted out and purchased the building for $752,000. The controller made the following entry:

Buildings		752,000
	Cash		586,000
	Sales Revenue		166,000

Prepare the entry that should have been made at the date of each acquisition. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Do not round intermediate calculations. Round final answers to 0 decimal places, e.g. 5,275.)

No.	Account Titles and Explanation	Debit	Credit
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