correction of improper cost entries plant acquisitions for selec 355034

Correction of Improper Cost Entries 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.

Book Values Appraisal Values

Land $200,000 $150,000

Buildings 230,000 350,000

Equipment 300,000 300,000

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

Land 150,000

Buildings 230,000

Equipment 300,000

Cash 680,000

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.

Store Equipment 27,300

Cash 2,000

Note Payable 23,000

Interest Payable 2,300

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:

Office Equipment 20,000

Cash 19,600

Purchase Discounts 400

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.

Warehouse 740,000

Cash 600,000

Profit on Construction 140,000

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