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Fred Couple Company: Dealing with Transactions

Below are transactions related to Fred Couples Company.

a. The city of Pebble Beach gives the company 5 acres of land as a plant site. The market value of this land is determined to be $81,000.
b. 13000 shares of common stock with a par value of $50 per share are issued in exchange for land and buildings. The property has been appraised at a fair market value of $810,000, of which $180,000 has been allocated to land and $630,000 to buildings. The stock of Fred Couples company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $65 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $58 per share.
c. No entry has been made to remove from the accounts for Material, Direct Labor, and Overhead the amounts properly chargeable to plant asset accounts for machinery constructed during the year. The following information is given relative to costs of the machinery constructed.

Materials used $12,500
Factory supplies used 900
Direct labor incurred 15,000
Additional overhead (over regular)caused by construction
of machinery, excluding factor supplies used 2,700
Fixed overhead rate applied to regular
manufacturing operations 60% of direct labor cost
Cost of similar machinery if it had been purchased
from outside suppliers 44,000

Task: Prepare journal entries on the books of Fred Couples Company to record these transactions.

Solution Preview

a. The city of Pebble Beach gives the company 5 acres of land as a plant site. The market value of this land is determined to be $81,000.

Land 81,000
Contribution Revenue 81,000

Contribution revenues are transfers of money and other assets to an organization with no expectation of service being provided directly to the person making the contribution. Contributions can be government grants, donations of cash and other assets, or cancellation of liabilities.

b. 13000 shares of common stock with a par value of $50 per share are issued in exchange for land and buildings. The property has been appraised at a fair market value of $810,000, of which $180,000 has been allocated to land and $630,000 to buildings. The ...

$2.19