Explore BrainMass

Explore BrainMass

    Accounting Entries for Asset Acquisition & Self-Construction

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    (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) 13,000 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 hares 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 ot remove from the accounts for Materials, 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 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

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

    © BrainMass Inc. brainmass.com June 3, 2020, 7:34 pm ad1c9bdddf

    Solution Preview

    a. No amount will be entered in company records for land because there is no cost. Value is good, but cost is accounting. Had the recipient of the land been a not-for-profit company, donated capital would have been treated differently.

    b. Given the information, we have an objective and recent method to value the ...

    Solution Summary

    The solution includes explanations and calculations for entries.