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In: Accounting

Exercise 10-13 Presented below is information related to Kingbird Company. 1. On July 6, Kingbird Company...

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

Solutions

Expert Solution

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.

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