Question

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.

Answer 1

Answer:

Explanation:

The journal entry is shown below:

Land A/c Dr $350,000

Building A/c Dr $1,050,000

Equipment A/c $700,000

        To Common stock A/c  $1,250,000          (12,500 shares × $100)

         To Paid- in capital in excess of par - Common stock A/c $850,000

(Being the allocation cost is recorded)

The computation is shown below:

Since the appraisal value of the property is

Particulars                                Ratio                       Allocated amount    

Land $ 400,000 (A)                 1 ÷ 6 (A ÷ D)          $350,000

Buildings $1,200,000 (B)         1 ÷ 2  (B ÷ D)          $1,050,000

Equipment $800,000 (C)         1 ÷ 3 (C ÷ D)          $700,000

Total $2,400,000 (D)                                               $2,100,000    

Total amount

= 12,500 shares × $168 per share

= $2,100,000