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Chapter 10: 7BE (page 502)

Fielder Company obtained land by issuing 2,000 shares of its \(10 par value common stock. The land was recently appraised at \)85,000. The common stock is actively traded at $40 per share. Prepare the journal entry to record the acquisition of the land.

Short Answer

Expert verified

Land is debited by $80,000, common stock is credited by $20,000 and paid in capital excess of par credited by $60,000 to record the acquisition of land.

Step by step solution

01

Calculation of cost of land and common stock value

CostofLand=NumberofShares脳MarketPriceofShares=2,000脳$40=$80,000

CommonStock=NumberofShares脳FaceValueofShares=2,000脳$10=$20,000

02

Journal entry of acquisition of land

Date

Particular

Debit ($)

Credit ($)

Land

$80,000

To Common stock

$20,000

To Paid in capital excess of par

$60,000

To record the acquisition of land

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Most popular questions from this chapter

Question: The Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building.

Organization and promotion expenses. (b) Architect鈥檚 fees. (c) Interest and taxes during construction. (d) Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation鈥檚 books and in its annual financial statements?

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Question: Discuss the basic accounting problem that arises in handling each of the following situations. (a) Assets purchased by issuance of common stock. (b) Acquisition of plant assets by gift or donation. (c) Purchase of a plant asset subject to a cash discount. (d) Assets purchased on a long-term credit basis. (e) A group of assets acquired for a lump sum. (f) An asset traded in or exchanged for another asset.

(Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements,

and buildings acquired for use in a business enterprise. The receipts are enclosed in parentheses.

(a) Money borrowed to pay building contractor (signed a note) \((275,000)

(b) Payment for construction from note proceeds 275,000

(c) Cost of land fill and clearing 8,000

(d) Delinquent real estate taxes on property assumed by purchaser 7,000

(e) Premium on 6-month insurance policy during construction 6,000

(f) Refund of 1-month insurance premium because construction completed early (1,000)

(g) Architect鈥檚 fee on building 22,000

(h) Cost of real estate purchased as a plant site (land \)200,000 and building $50,000) 250,000

(i) Commission fee paid to real estate agency 9,000

(j) Installation of fences around property 4,000

(k) Cost of razing and removing building 11,000

(l) Proceeds from salvage of demolished building (5,000)

(m) Interest paid during construction on money borrowed for construction 13,000

(n) Cost of parking lots and driveways 19,000

(o) Cost of trees and shrubbery planted (permanent in nature) 14,000

(p) Excavation costs for new building 3,000

Instructions

Identify each item by letter and list the items in columnar form, using the headings shown below. All receipt amounts should be

reported in parentheses. For any amounts entered in the Other Accounts column, also indicate the account title.

Item Land Land Improvements Buildings Other Accounts
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