Question

Exercise 10-13

Presented below is information related to Kingbird Company.

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

Land		$396,000
Buildings		1,188,000
Equipment		792,000
Total		$2,376,000

Kingbird Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $202 per share on the date of the purchase of the property.

2. Kingbird 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		$112,310
Construction of bases for equipment to be installed later		143,540
Driveways and parking lots		132,060
Remodeling of office space in building, including new partitions and walls		147,880
Special assessment by city on land		17,000

3. On December 20, the company paid cash for equipment, $272,300, subject to a 2% cash discount, and freight on equipment of $11,410.

Prepare entries on the books of Kingbird 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.

List of Accounts

Accounts Payable
Accumulated Depreciation-Building
Accumulated Depreciation-Equipment
Accumulated Depreciation-Machinery
Accumulated Depreciation-Trucks
Buildings
Cash
Common Stock
Contribution Revenue
Cost of Goods Sold
Depreciation Expense
Direct Labor
Discount on Notes Payable
Equipment
Factory Overhead
Gain on Disposal of Buildings
Gain on Disposal of Equipment
Gain on Disposal of Machinery
Gain on Disposal of Trucks
Insurance Expense
Interest Expense
Inventory
Land
Land Improvements
Loss on Disposal of Buildings
Loss on Disposal of Equipment
Loss on Disposal of Machinery
Loss on Disposal of Trucks
Machinery
Maintenance and Repairs Expense
Materials
No Entry
Notes Payable
Organization Expense
Paid-in Capital in Excess of Par - Common Stock
Prepaid Insurance
Retained Earnings
Salaries and Wages Expense
Sales Revenue
Trading Securities
Trucks

Answer 1

Solution:
No.	Account Titles and Explanation	Debit	Credit
1.	Land	420,842
	Buildings	1,262,500
	Equipment	841,658
	Common Stock		1,250,000
	Paid-in Capital in Excess of Par - Common Stock		1,275,000
Working Notes:
	Account Titles and Explanation	Debit	Credit
	Land	420,842
	Buildings	1,262,500
	Equipment	841,658
	Common Stock		1,250,000
	[12,500 shares issued x Par value $100]
	Paid-in Capital in Excess of Par - Common Stock		1,275,000
	[(12,500 shares issued x market price per share $202) - par value 1,250,000]
	[$2,525,000 - $1,250,000]
	The cost of acquired the plant assets is the market value of shares issued = 12,500 x $202 =$2,525,000
	And this cost is allocated to assets acquired based on their appraised value
	Land = (Land appraised value/total appraised value of all assets) x Market value of share Issued.
	=($396,000/$2,376,000) x $2,525,000]
	=(0.16667 x $2,525,000 )
	=420,841.75
	=$420,842
	Buildings = (Buildings appraised value/total appraised value of all assets) x Market value of share Issued.
	=($1,188,000/$2,376,000) x $2,525,000]
	=(0.50 x $2,525,000 )
	=1,262,500
	Equipment = (Equipment appraised value/total appraised value of all assets) x Market value of share Issued.
	=($792,000/$2,376,000) x $2,525,000]
	=(0.33333 x $2,525,000 )
	=841,658
No.	Account Titles and Explanation	Debit	Credit
2.	Buildings	260,190
	Equipment	143,540
	Land Improvements	132,060
	Land	17,000
	Cash		552,790
Working Notes:
	Account Titles and Explanation	Debit	Credit
	Buildings	260,190
	[Repair $112,310 + Remodeling $147,880 ]
	Equipment	143,540
	Land Improvements	132,060
	Land	17,000
	Cash		552,790
No.	Account Titles and Explanation	Debit	Credit
3.	Equipment	278,264
	Cash		278,264
Working Notes:
	Account Titles and Explanation	Debit	Credit
	Equipment	278,264
	Cash		278,264
	[cost of Equipment $272,300 x (1-2% discount) + Freight $11,410]
	[272,300 x (1-.02) + 11,410 ]
	[272,300 x 0.98 + 11,410 ]
	[266,854 + 11,410 = 278,264 ]
Please feel free to ask if anything about above solution in comment section of the question.