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Chapter 10: Q14Q (page 531)

Question: Schwartzkopf Co. purchased for \(2,200,000 property that included both land and a building to be used in operations. The seller鈥檚 book value was \)300,000 for the land and \(900,000 for the building. By appraisal, the fair value was estimated to be \)500,000 for the land and $2,000,000 for the building. At what amount should Schwartzkopf report the land and the building at the end of the year?.

Short Answer

Expert verified

Answer

Land reported at $440,000 and building reported at $1,760,000.

Step by step solution

01

Cost of land

CostofLand=FairvalueofLandFairvalueofLand+FairvalueofBuilding脳PurchasePrice=$500,000$500,000+$2,000,000脳$2,200,000=$440,000

02

Cost of building

CostofBuilding=FairvalueofBuildingFairvalueofLand+FairvalueofBuilding脳PurchasePrice=$2,000,000$500,000+$2,000,000脳$2,200,000=$1,760,000

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Most popular questions from this chapter

(Nonmonetary Exchange) Carlos Arruza Company exchanged equipment used in its manufacturing operations plus \(3,000 in cash for similar equipment used in the operations of Tony LoBianco Company. The following information pertains to the exchange.

Carlos Arruza Co.

Tony LoBianco Co.

Equipment (cost)

\)28,000

$28,000

Accumulated depreciation

19,000

10,000

Fair value of equipment

12,500

15,500

Cash given up

3,000

Instructions

  1. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange lacks commercial substance.
  2. Prepare the journal entries to record the exchange on the books of both companies. Assume that the exchange has commercial substance.

Garcia Corporation purchased a truck by issuing an $80,000, 4-year, zero-interest-bearing note to Equinox Inc. The market rate of interest for obligations of this nature is 10%. Prepare the journal entry to record the purchase of this truck.

(Entries for Acquisition of Assets) 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:

Land

\( 400,000

Buildings

1,200,000

Equipment

800,000

Total

\)2,400,000

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 first occupied the building.

Repairs to building

\(105,000

Construction of bases for equipment to be installed later

135,000

Driveways and parking lots

122,000

Remodeling of office space in building, including new partitions and walls

161,000

Special assessment by city on land

18,000

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.

(Nonmonetary Exchanges) Holyfield Corporation wishes to exchange a machine used in its operations. Holyfield has received the following offers from other companies in the industry.

  1. Dorsett Company offered to exchange a similar machine plus \(23,000. (The exchange has commercial substance for both parties.)
  2. Winston Company offered to exchange a similar machine. (The exchange lacks commercial substance for both parties.)
  3. Liston Company offered to exchange a similar machine, but wanted \)3,000 in addition to Holyfield鈥檚 machine. (The exchange has commercial substance for both parties.)

In addition, Holyfield contacted Greeley Corporation, a dealer in machines. To obtain a new machine, Holyfield must pay \(93,000 in addition to trading in its old machine.

Holyfield

Dorsett

Winston

Liston

Greeley

Machine cost

\)160,000

\(120,000

\)152,000

\(160,000

\)130,000

Accumulated depreciation

60,000

45,000

71,000

75,000

鈥�0鈥�

Fair value

92,000

69,000

92,000

95,000

185,000

Instructions

For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company.

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of \(315,000. The estimated fair values of the assets are land \)60,000, building \(220,000, and equipment \)80,000. At what amounts should each of the three assets be recorded?
See all solutions

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