Acquisition Cost The following transactions of Weber Company occurred during 201
ID: 2421028 • Letter: A
Question
Acquisition Cost
The following transactions of Weber Company occurred during 2013:
The company acquired a tract of land in exchange for 1,000 shares of $10 par value common stock. The stock was traded on the New York Stock Exchange at $24 on the date of exchange. The land had a book value on the selling company's records of $5,000, and it was believed to be worth "anything up to $30,000".
An engine on a truck was replaced. The truck originally cost $10,000 3 years ago and was being depreciated at $2,000 per year. The engine cost $1,000 to replace.
The company acquired a tract of land that was believed to have mineral deposits by issuing 500 shares of preferred stock of $50 par value. The preferred stock was rarely traded. The last transaction was 2 months earlier,when 50 shares were sold at $75 per share. The owner of the land was willing to accept cash of $55,000, and an appraisal had shown a value of $60,000.
The company purchased a machine with a list price of $8,500 by issuing a 2-year, $10,000 non-interest-bearing note when the market rate of interest was 10%.
For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Round your answers to the nearest dollar.
Click here to access the PV table to use with this problem.
1
Stock exchanged
2
Accumulated Depreciation
3
Land is acquired
4
Purchase of machine
Prepare journal entries to record the preceding events.For a compound transaction, if an amount box does not require an entry, leave it blank or enter "0". Round your answers to the nearest dollar.
Click here to access the PV table to use with this problem.
1
Stock exchanged
2
Accumulated Depreciation
3
Land is acquired
4
Purchase of machine
Explanation / Answer
1./
LAND A/C...............................................DR $24000 (1000 * $24)
TO COMMON STOCK A/C $10000 (1000 * $10)
TO EXCESS PAID IN CAPITAL $14000 (1000 * $14)
2./
ACCUMULATED DEPRICIATION A/C.......................DR $6000 ($2000 * 3)
TO TRUCK FIXED ASSET A/C $6000
AFTER THIS TRANSACTION THE BALANCE OF TRUCK WILL BE SHOWN AS $4000, WHEN A NEW ENGINE IS REPLACED FOR $1000, THAN THE VALUE OF TRUCK WILL INCEREASE TO $5000
3./
LAND A/C.........................................DR $37500 (500 *$75)
TO PREFERED STOCK A/C $25000 (500 * $50)
TO EXCESS PAID IN CAPITAL $12500 (500 * $25)
4./
MACHINARY A/C......................................DR $8264
DISCOUNT ON NOTES PAYBLE A/C........DR $1736
TO NOTES PAYBLE A/C $10000
MACHINARY ACCOUNT WILL BE DEBITED WITH THE PRESENT VALUE OF NOTES PAYBLE.
PRESENT VALUE = $10000 * PVIF10%, 2 PERIODS
= $10000 * 0.8264
= $8264
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