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13 1. On July 6, Windsor Company acquired the plant assets of Doonesbury Company, which had...

13

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

Land

$600,000
Buildings

1,800,000
Equipment 1,200,000
   Total $3,600,000


Windsor Company gave 12,500 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. Windsor 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 $157,500
Construction of bases for equipment to be installed later 202,500
Driveways and parking lots 183,000
Remodeling of office space in building, including new partitions and walls 241,500
Special assessment by city on land 27,000


3. On December 20, the company paid cash for equipment, $390,000, subject to a 2% cash discount, and freight on equipment of $15,750.

Prepare entries on the books of Windsor 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.

Solutions

Expert Solution

1.

No. Account Titles and Explanation Debit Credit
1. Land (see below- Explanation-1) $350,000
Buildings $1,050,000
Equipment $700,000
Share Capital- ordinary (12,500 shares ×$100) $1,250,000
Share Premium- ordinary (12,500 shares × ($168 - $100)] $850,000
(To record issue of common stock in exchange of Plant assets)
2. Building ($157,500 + $241,500) $399,000
Equipment $202,500
Land Improvements $183,000
Land $27,000
Cash $811,500
(To record the amount expended by company)
3. Equipment (see below- Explanation-2) $397,950
Cash $397,950
(To record purchase of Equipment)

Explanation:-

Explanation-1) The cost of property plant and Equipment is 12,500 shares × $168 = $2,100,000
Land = ($600,000/$3,600,000) × $2,100,000 = $350,000
Building = ($1,800,000/$3,600,000) × $2,100,000 = $1,050,000
Equipment = ($1,200,000/$3,600,000) × $2,100,000 = $700,000
Explanation-2) cash price of Equipment - Cash discount + Freight expense
$390,000 - ($390,000 × 2%) + $15,750
$390,000 - $7,800 + $15,750
$397,950

ekkarill92 answered 1 year ago
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