Question

E10.13 (LO 1, 3) (Entries for Acquisition of Assets) Presented below is information related to Zonker Company.

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

Land Buildings Equipment	$400,000 1,200,000 800,000
Total	$2,400,000

   Zonker Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $168 per share on the date of the purchase of the property.

How do I calculate how much each asset is to receive? Example 2100000 (12500*168). But I'm not sure how to assign.

Answer 1

SOLUTION:

Cost of the property, plant and equipment: $12,500 * $168 i= $2,100,000

Allocated cost is based on appraisal values, thus:

Land: 400,000 / 2,400,000 * 2,100,000 = $350,000

Building: 1,200,000 / 2,400,000 * 2,100,000 = $1,050,000

Equipment: 800,000 / 2,400,000 * 2,100,000 = $700,000

　

Journal entry:

Particulars	Debit	Credit
Land	350,000
Building	1,050,000
Equipment	700,000
Common stock (12,500 * $100)		1,250,000
Paid-in Capital in Excess of Par - Common Stock		850,000