Question

Presented below is information related to Wildhorse Company. 1. On July 6, Wildhorse 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 Wildhorse Company gave 12,200 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. Wildhorse Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building. (Prepare consolidated entry for all transactions below.) Repairs to building $189,000 Construction of bases for equipment to be installed later 243,000 Driveways and parking lots 219,600 Remodeling of office space in building, including new partitions and walls 289,800 Special assessment by city on land 32,400 3. On December 20, the company paid cash for equipment, $468,000, subject to a 2% cash discount, and freight on equipment of $18,900.

Answer 1

Answer:

1. Journal Entry                                   Debit               Credit

Land                                                $350,000

Building                                           $1,050,000

Machinery and Equipment             $700,000

        Common stock                                                 $1,220,000

        (12,200 * $100)

         Paid in capital in excess of par                       $829,600

         ($2,049,600 - $1,220,000)

Workings

Cost of plant is $168 *12,200 = $2,049,600

2. Journal Entry                     Debit               Credit

Building                                $478,800

($189,000 + $289,800)

Machinery and Equipment  $243,000

Land improvements             $219,600

Land                                      $32,400

     Cash                                                          $973,800

3. Journal Entry                          Debit         Credit

Machinery and Equipment      $477,540

         Cash                                                    $477,540

($18,900 + $458,640 which is 98% of $468,000

Answer 2

The journal entry will be:

• Debit Land $350000
• Debit Building $1050000
• Debit Machinery $700000

• Credit Common stock $1220000
• Credit Paid in capital in excess of par $829600

The journal entry for the second question will be

• Debit Building $478800
• Debit Machinery and Equipment $243000
• Debit Land improvement $219600

• Debit Land $32400
• Credit Cash $973800

The journal entry for the third question will be:

• Debit Machinery and Equipment $477540
• Credit Cash $477540

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