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 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.
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
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
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.
Profit on Construction 140,000
Prepare the entry that should have been made at the date of each acquisition.