Question

Presented below is information related to Zonker Company.

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

 Zonker 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. Zonker Company expended the following amounts in cash between July 6 and December 15, the date when it fi rst occupied the building. Repairs to building Construction of bases for equipment to be installed later Driveways and parking lots Remodeling of offi ce space in building, 

 3. On December 20, the company paid cash for equipment, $260,000, subject to a 2% cash discount, and freight on equipment of $10,500.

Instructions

Prepare entries on the books of Zonker Company for these transactions

Answer 1

1.	Land	350,000
	Building......................................................................	1,050,000
	Equipment.................................................................	700,000
	Common Stock (12,500 X $100)...................		1,250,000
	Paid-in Capital in Excess of              Par—Common Stock
	($2,100,000 – $1,250,000)...........................		850,000

 

The cost of the property, plant and equipment is $2,100,000 ($12,500 X $168). This cost is allocated based on appraisal values as follows:

 

Land	$400,000	X $2,100,000	= $350,000
	$2,400,000

 

Building	$1,200,000	X $2,100,000	= $1,050,000
	$2,400,000

 

Equipment	$800,000	X $2,100,000	= $700,000
	$2,400,000

 

2.	Buildings ($105,000 plus $161,000)......................	266,000
	Equipment.................................................................	135,000
	Land Improvements.................................................	122,000
	Land	18,000
	Cash..................................................................		541,000
3.	Equipment.................................................................	265,300
	Cash..................................................................		265,300
	($10,500 plus $254,800, which is 98%
	of $260,000.)