Valdilla's Music Store acquired Land and old buildling in exchange for 50,000 shares of its common stock, par $0.50 and cash of $80,000.
The auditor ascertains that the company's stock was selling for $15 per share when the purchase was made. The following additional costs were incurred to complete the transaction:
Legal cost to complete transaction......$10,000
Property tax for previous year....................$30,000
Cost of building demolition................................$21,000
Salvage value of demolished building.........................(6,000)
What entry should be made to record the acquisition of the property? For how much?
Please provide details of solution.
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Where exchange takes place (stock with land) we find the fair value which is more readily determinable. In this case the value of land is not know but the market price of share is known.
The amount of consideration paid would be 50,000 shares X $15 per share + $80,000 cash = ...
The solution explains the entry to be made for acquisition of property
Prepare the journal entry to record the acquisition of the property and the related fees.
During Year 4, a firm purchased land, building, and equipment for a lump sum payment of $450,000. In connection with this acquisition, the firm also incurred legal fees of $5,000, accounting fees of $5,000, real estate transfer taxes on the building of $10,000, building inspection fee of $2,000, and appraisal costs of $10,000. The appraisal established the value of the land at $100,000, the value of the building at $300,000, and the value of the equipment at $100,000. All the costs have been accumulated in a temporary account titled "Site Acquisition Costs."
Prepare the journal entry to record the acquisition of the property and the related fees.View Full Posting Details