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    10-8, 10-10, 10-11, Acquisition costs

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    Pinewood Company purchased two buildings on four acres of land. The lump sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the land.

    Determine the initial valuation of the buildings and the land.

    Teradene Corporation purchased land as a factory site and contracted with Maxtor Construction to construct a factory. Teradene made the following expenditures related to the acquisition of the land, building and machinery to equip the factory:

    Purchase price of the land $1,200,000
    Demolition and removal of old building 80,000
    Clearing and grading the land before construction 150,000
    Various closing costs in connection with acquiring the land 42,000
    Architect's fee for the plans for the new building 50,000
    Payments to Maxtor for building construction 3,250,000
    Machinery purchased 860,000
    Freight charges on machinery 32,000
    Trees, plants and other landscaping 45,000
    Installation of sprinkler system for the machinery 5,000
    Cost to build special platforms and install wiring for machinery 12,000
    Cost of trail runs to ensure proper installation of machinery 7,000
    Fire theft insurance on the factory for the first for the first year of use 24,000

    In addition to the above expenditures, Teradene purchased four forklifts from Caterpillar. In payment Teradene paid $16,000 cash and signed a noninterest bearing note requiring the payment of $70,000 in one year. An interest rate of 7% properly reflects the time value of money for this type of loan.

    Determine the initial valuation of each of the assets Teradene acquired in acquired in above transactions.

    On February 1, 2011, the Xilon Corporation issued 5,000 shares of its nonpar common stock in exchange for five acres of land located in the city of Monrovia. On the date of the acquisition Xilon's common stock had a fair value of $18.00. An office building was constructed on the site by an independent contractor. The building was completed on November 2, 2011, at a cost of $600,000. Xilon paid $400,000 in cash and the remainder was paid by the city of Monrovia.

    Prepare the journal entries to record the acquisition of the land and the building.

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    Solution Preview

    I have completed the tutorial in Excel (attached) for you (click in ...

    Solution Summary

    I have completed the tutorial in Excel (attached) for you (click in cells to see computations). Verify the amounts on E10-8 as there were some typos in the 000's. If you update the worksheet for correct amounts, the response will automatically update with the correct response.