Entries for Acquisition of Assets Presented below are information related to Rommel Company12/18/2015 Entries for Acquisition of Assets Presented below are 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 $400,000 Building 1,200,000 Machinery and equipment 800,000 Total $2,400,000 Rommel Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market value of $180 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 $105,000 Construction of bases for machinery to be installed later 135,000 Driveways and parking lots 122,000 Remodeling of office space in building, including new partitions and walls 161,000 Special assessment by city on land 18,000 3. On December 20, the company paid cash for machinery, $280,000, subject to a 2% cash discount, and freight on machinery of $10,500. Prepare entries on the books of Rommel Company for these transactions.
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Treatment of Various Costs Allegro Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.
Abstract company fee for title search $520 Architectâ fees 3,170 Cash paid for land and dilapidated building thereon 92,000 Removal of old building $20,000 Less: Salvage 5,500 14,500 Interest on short-term loans during construction 7,400 Excavation before construction for basement 19,000 Machinery purchased (subject to 2% cash discount, which was not taken) 65,000 Freight on machinery purchased 1,340 Storage charges on machinery, necessitated by non-completion of building when machinery was delivered 2,180 New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000 Assessment by city for drainage project 1,600 Hauling charges for delivery of machinery from storage to new building 620 Installation of machinery 2,000 Trees, shrubs, and other landscaping after completion of building (Permanent in nature) 5,400 Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded. Gross Profit Method Astaire Company uses the gross profit method to estimate inventory for monthly reporting purposes. Presented below is information for the month of May.
Inventory, May 1 $ 160,000 Purchases (gross) 640,000 Freight-in 30,000 Sales 1,000,000 Sales returns 70,000 Purchase discounts 12,000 (a) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of sales. (b) Compute the estimated inventory at May 31, assuming that the gross profit is 25% of cost. Correct Intangible Asset Account Reichenbach Co., organized in 2009, has set up a single account for all intangible assets. The following summary discloses the debit entries that have been recorded during 2009 and 2010. Prepare the necessary entries to clear the Intangible Assets account and to set up separate accounts for distinct types of intangibles. Make the entries as of December 31, 2010, recording any necessary amortization and reflecting all balances accurately as of that date. (Ignore income tax effects.)
Inventoriable Costs—Error Adjustments Werth Company asks you to review its December 31, 2010, inventory values and prepare the necessary adjustments to the books. The following information is given to you.
1. Werth uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2010. 2. Not included in the physical count of inventory is $10,420 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Bubbey on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $12,800 on December 31. The merchandise cost $7,350, and Bubbey received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $15,630. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $8,540 of merchandise purchased from Minsky Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $10,438 of inventory held by Werth on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Sims f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $18,900 on December 31. The cost of this merchandise was $11,520, and Sims received the merchandise on January 5. 8. Excluded from inventory was a carton labeled Please accept for credit.This carton contains merchandise costing $1,500 which had been sold to a customer for $2,600. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged. (a) Determine the proper inventory balance for Werth Company at December 31, 2010. (b) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2010. Assume the books have not been closed. Accounting for R&D Costs Margaret Avery Company from time to time embarks on a research program when a special project seems to offer possibilities. In 2009 the company expends $325,000 on a research project, but by the end of 2009 it is impossible to determine whether any benefit will be derived from it.
(a) What account should be charged for the $325,000, and how should it be shown in the financial statements? (b) The project is completed in 2010, and a successful patent is obtained. The R&D costs to complete the project are $130,000. The administrative and legal expenses incurred in obtaining patent number 472-1001-84 in 2010 total $24,000. The patent has an expected useful life of 5 years. Record these costs in journal entry form. Also, record patent amortization (full year) in 2010 (c) In 2011, the company successfully defends the patent in extended litigation at a cost of $47,200, thereby extending the patent life to December 31, 2018. What is the proper way to account for this cost? Also, record patent amortization (full year) in 2011 (d) Additional engineering and consulting costs incurred in 2011 required to advance the design of a product to the manufacturing stage total $60,000. These costs enhance the design of the product considerably. Discuss the proper accounting treatment for this cost. Lower-of-Cost-or-Market The inventory of Oheto Company on December 31, 2011, consists of the12/18/2015 Lower-of-Cost-or-Market The inventory of Oheto Company on December 31, 2011, consists of the following items.
(a) Determine the inventory as of December 31, 2011, by the lower-of-cost-or-market method, applying this method directly to each item. (b) Determine the inventory by the lower-of-cost-or-market method, applying the method to the total of theinventory. Inventoriable Costs Error Adjustments Werth Company asks you to review its December 31, 2010, inventory values and prepare the necessary adjustments to the books. The following information is given to you.
1. Werth uses the periodic method of recording inventory. A physical count reveals $234,890 of inventory on hand at December 31, 2010. 2. Not included in the physical count of inventory is $10,420 of merchandise purchased on December 15 from Browser. This merchandise was shipped f.o.b. shipping point on December 29 and arrived in January. The invoice arrived and was recorded on December 31. 3. Included in inventory is merchandise sold to Bubbey on December 30, f.o.b. destination. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale on account for $12,800 on December 31. The merchandise cost $7,350, and Bubbey received it on January 3. 4. Included in inventory was merchandise received from Dudley on December 31 with an invoice price of $15,630. The merchandise was shipped f.o.b. destination. The invoice, which has not yet arrived, has not been recorded. 5. Not included in inventory is $8,540 of merchandise purchased from Minsky Industries. This merchandise was received on December 31 after the inventory had been counted. The invoice was received and recorded on December 30. 6. Included in inventory was $10,438 of inventory held by Werth on consignment from Jackel Industries. 7. Included in inventory is merchandise sold to Sims f.o.b. shipping point. This merchandise was shipped after it was counted. The invoice was prepared and recorded as a sale for $18,900 on December 31. The cost of this merchandise was $11,520, and Sims received the merchandise on January 5. 8. Excluded from inventory was a carton labeled œPlease accept for credit. This carton contains merchandise costing $1,500 which had been sold to a customer for $2,600. No entry had been made to the books to reflect the return, but none of the returned merchandise seemed damaged. (a) Determine the proper inventory balance for Werth Company at December 31, 2010. (b) Prepare any correcting entries to adjust inventory to its proper amount at December 31, 2010. Assume the books have not been closed. FIFO, LIFO, and Average Cost Determination LoBianco Company record of transactions for the month of April was as follows.
(a) Assuming that periodic inventory records are kept, compute the inventory at April 30 using (1) LIFO and (2) Average cost. (b) Assuming that perpetual inventory records are kept in both units and dollars, determine the inventory at April 30 using (1) FIFO and (2) LIFO. (c) Compute cost of goods sold assuming periodic inventory procedures and inventory priced at FIFO. (d) In an inflationary period, which inventory method FIFO, LIFO, average cost will show the highest netincome? Entries for Asset Acquisition, Including Self-Construction Below are transactions related to Impala Company.
(a) The City of Pebble Beach gives the company 5 acres of land as a plant site. The market value of this land is determined to be $81,000. (b) 14,000 shares of common stock with a par value of $50 per share are issued in exchange for land and buildings. The property has been appraised at a fair market value of $810,000, of which $180,000 has been allocated to land and $630,000 to buildings. The stock of Impala Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $65 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $58 per share. (c) No entry has been made to remove from the accounts for Materials, Direct Labor, and Overhead the amounts properly chargeable to plant asset accounts for machinery constructed during the year. The following information is given relative to costs of the machinery constructed. Materials used $12,500 Factory supplies used 900 Direct labor incurred 16,000 Additional overhead (over regular) caused by construction 2,700 of machinery, excluding factory supplies used Fixed overhead rate applied to regular manufacturing operations 60% of direct labor cost Cost of similar machinery if it had been purchased from outside suppliers 44,000 Prepare journal entries on the books of Impala Company to record these transactions. |
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