Question

Presented below is information related to Sunland Company.

1. On July 6, Sunland Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is:

Land		$200,000
Buildings		600,000
Equipment		400,000
Total		$1,200,000

Sunland Company gave 12,000 shares of its $100 par value common stock in exchange. The stock had a market price of $168 per share on the date of the purchase of the property.

2. Sunland Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building. (Prepare consolidated entry for all transactions below.)

Repairs to building		$115,500
Construction of bases for equipment to be installed later		148,500
Driveways and parking lots		134,200
Remodeling of office space in building, including new partitions and walls		177,100
Special assessment by city on land		19,800

3. On December 20, the company paid cash for equipment, $286,000, subject to a 2% cash discount, and freight on equipment of $11,550.

Prepare entries on the books of Sunland Company for these transactions. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when 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.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.

Answer 1

	Journal Entries in books of Sunland Company
Sl. No	Description		Debit	Credit
1	Land		336,000
	Building		1,008,000
	Equipment		672,000
	Share capital-Ordinary12,000*100			1,200,000
	Share premium-Ordinary(12000*(168-100)			816,000
	(Plan assets acquired and share issued at premium)
2	Building(115,500+117,100)		232,600
	Equipment		148,500
	Land Improvements		134,200
	Land		19,800
	Cash			535,100
	(Expenses incurred capitalised)
3	Equipment		291,830
	Cash			291,830
	(Equipment purchased for cash)
W.N for J.E.1
	No. of Shares issued		12,000
	(12,000 shares * 168 per share)		2,016,000
	Now we have to allocate the cost to each asset based on appraisal value:
	Land- $(200,000/1,200,000*2,016,000		$336,000
	Buildings- 600,000/1,200,000*2016,000		$1,008,000
	Equipment- 400,000/1,200,000*2,016,000		$672,000
W.N for J.E.2
	Repairs to building of $115,500and Remodelling of office of $177,100
	is capitalised to Building A/c.
	Likewise all the other expenses relating to respective assets are capitalised
	to there respective Asset A/c.
W.N for J.E.3
	Cash payment after discount = $286,000(100-2)% = $280,280
	Add: Freight payment		$11,550
	Total cash payment		$291830

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