1 On July 6 Zonker Company acquired the plant assets of Doon

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

$418,200

1,230,000

Zonker Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a fair value of $176 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 first occupied the building. (Prepare consolidated entry for all transactions below.)

3. On December 20, the company paid cash for equipment, $285,300, subject to a 1% cash discount, and freight on equipment of $10,490.

Prepare entries on the books of Zonker Company for these transactions. (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.)

Solution

Journal Entries in the books of Zonker Company .

1.LAND A/C DR    $3,74,000

BUILDING A/C DR $11,00,00

MACHINERY & EQUIPMENT A/C DR $7,26,000

                      TO COMMON STOCK A/C CR $12,50,000

                      TO PAID UP CAPITAL IN EXCESS OF PAR A/C CR $ 9,50,000

(The cost of plant of asset is $22,00,000. The cost is allocated in proportion to the appraised value of asset .i.e 17% to Land, 50% to Building and 33% to theEquipment.)

2.BUILDING A/C DR (1,09,600+1,70,300) $2,79,900

MACHINERY & EQUIPMENT A/C DR $1,38,600

LAND IMPROVEMENT A/C DR    $1,38,900

LAND A/C DR    $18,200

                         TO CASH A/C CR         $575600

3.MACHINERY & EQUIPMENT A/C DR $292937

                          TO CASH A/C CR         $292937

(99% OF $285300+10490)