Exercise 10-6

Plant acquisitions for selected companies are as follows. 1. Novak Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $896,000. At the time of purchase, Torress assets had the following book and appraisal values.

		Book Values			Appraisal Values
Land		$256,000			$192,000
Buildings		320,000			448,000
Equipment		384,000			384,000

To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.

Land		192,000
Buildings		320,000
Equipment		384,000
Cash				896,000

2. Splish Enterprises purchased store equipment by making a $2,560 cash down payment and signing a 1-year, $29,440, 10% note payable. The purchase was recorded as follows.

Equipment		34,944
Cash				2,560
Notes Payable				29,440
Interest Payable				2,944

3. Blossom Company purchased office equipment for $20,800, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:

Equipment		20,800
Cash				20,384
Purchase Discounts				416

4. Blue Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $34,560. The company made no entry to record the land because it had no cost basis. 5. Kingbird Company built a warehouse for $768,000. It could have purchased the building for $947,200. The controller made the following entry.

Buildings		947,200
Cash				768,000
Profit on Construction				179,200

Prepare the entry that should have been made at the date of each acquisition. (Round intermediate calculations to 5 decimal palces, e.g. 0.56487 and final answers to 0 decimal places, e.g. 5,275. 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.
4.
5.