Question

1. On July 6, Pearl Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is:

Land		$438,000
Buildings		1,314,000
Equipment		876,000
Total		$2,628,000

Pearl Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $242 per share on the date of the purchase of the property.

2. Pearl Company expended the following amounts in cash between July 6 and December 15, the date when it first occupied the building. (Prepare consolidated entry for all transactions below.)

Repairs to building		$111,480
Construction of bases for equipment to be installed later		126,060
Driveways and parking lots		116,880
Remodeling of office space in building, including new partitions and walls		166,160
Special assessment by city on land		19,140

3. On December 20, the company paid cash for equipment, $278,500, subject to a 2% cash discount, and freight on equipment of $11,530.

Prepare entries on the books of Pearl Company for these transactions(Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No.	Account Titles and Explanation	Debit	Credit
1.
2.
3.

Answer 1

Pearl Company Journal Entery Debit in $ Credit in $ Particulars Trans. Building a/c Machinery and Equipment a/c Dr. Land a/c 1 Dr. 1512500 1008333 504167 Dr. To Share Capital-Ordinary To Share Premium-Ordinary 1250000 1775000 The cost of the property, plant and equipment is $3,025,000 (12,500 x $242) The cost is allocated based on appraisal values as follows: (438000 2628000) x 3025000 Building (1314000 2628000) x 3025000 Machinery & Equipment (876000/ 2628000) x 3025000 Land 504167 1512500 1008333 Building a/c Machinery and Equipment a/c Dr. 2 Dr. 277640 126060 Land Improvements a/c Land a/c Dr. 116880 Dr. 19140 To Cash 539720 Machinery and Equipment a/c Dr 3 284460 To Cash 284460 |($11,530+$272,930, which is 98% of $278,500)