Question

The following account balances were included in Bromley Company’s balance sheet on December 31, 2018:

Land	$100,000
Land improvements	20,000
Buildings	300,000
Machinery and Equipment	500,000

During 2019, the following transactions occurred:

Jan. 1	Land was acquired for $70,000 for a future building site. Commissions of $4,000 were paid to a real estate agent.
Feb. 1	A factory and land were acquired from Kent Development Company by issuing 20,000 shares of $3 par common stock. At that time, the stock was selling for $10 per share on the New York Stock Exchange. The independently appraised values of the land and the factory were $60,000 and $180,000, respectively.
Mar. 1	Equipment was acquired at a cost of $120,000. In addition, sales tax, freight costs, and installation costs were $7,000, $10,000, and $16,000, respectively. During installation, the equipment was damaged, and $2,000 was spent for repairs.
Apr. 1	A new parking lot was installed at a cost of $30,000.
Aug. 1	Half the land purchased in Item 1 was prepared as a building site. Costs of $26,000 were incurred to clear the land, and the timber recovered was sold for $3,000. A new building was built for $60,000. Architect’s fees relating to construction were $18,000, and imputed interest on equity funds used during construction was $15,000. No debt is outstanding.
Sept. 1	Costs of $20,000 were incurred to improve some leased office space. The lease will terminate in 2021 and is not expected to be renewed.
Oct. 1	A group of new machines was purchased under a royalty agreement that provides for payment of annual royalties based on units produced. The invoice price of the machines was $30,000, freight costs were $2,000.
Dec. 31	Royalty payments on the new machines for 2019 totalled $12,000.

Required:

Prepare journal entries to record all the preceding events. Unless otherwise indicated, assume the company makes all payments in cash Prepare journal entries to record all the events that occurred during 2019. Unless otherwise indicated, assume the company makes all payments in cash. General Journal Instructions PAGE 16 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Answer 1

Answer:

No.	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1	Jan-01	Investment in Land		74,000
		Cash			74,000
	To record the land acquired
2	Feb-01	Land		50,000
		Buildings		150,000
		Common stock			60,000
		Additional Paid-In capital - Common Stock			140,000
	To Record the buildings land acquired through issuance of common stock
3	Mar-01	Equipment		153,000
		Repair and Maintenance Expense		2,000
		Cash			155,000
	To record expense associated with equipment
4	Apr-01	Land Improvements		30,000
		Cash			30,000
	To record the instalment of new parking lot
5	Aug-01	Land		60,000
		Buildings		78,000
		Investment in Land			37,000
		Cash			101,000
	To record the costs associated with land and buildings
6	Sep-01	Leasehold Improvements		20,000
		Cash			20,000
	To record the Leasehold Improvements
7	Oct-01	Equipment		32,000
		Cash			32,000
	To record the purchase of equipment
8	Dec-01	Royalty Expense		12,000
		Cash			12,000
	To record the royalty payment

Calculation:

Entry #1

Land Acquired and cash paid = Cost of acquiring + Commission = $70,000 + $4,000 =74,000

Entry #2

Amount of Land = (Appraised value of land/Total appraised value of land and building)*Common stock = (60000/(60000+180000))*20,000*10 = 50,000

Amount of Building = (Appraised value of Building/Total appraised value of land and building)*Common stock = (180000/(60000+180000))*20,000*10 = 1,50,000

Common stock = 20000*$3 = 60,000

Entry #3

Value of Equipment = Cost of acquiring +sales tax + freight costs + installation cost=120000+7000+10000+16000 = 1,53,000

Entry #5

Costs associated with land = Half of cost of land acquired + cost to clear the land + half of commission relating to land - sale of timber recovered = (35000+26000+2000)-3000 = 60,000

Costs associated with land = Cost of construction + architecture fee = 60000+18000 = 78,000.

Investment in Land reduced (half of land acquired)= 74000/2 = 37,000