Question

Presented below is information related to Monty Company.

1. On July 6, Monty Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is: Land $300,000 Buildings 900,000 Equipment 600,000 Total $1,800,000 Monty Company gave 12,300 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.

2. Monty 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 $126,000 Construction of bases for equipment to be installed later 162,000 Driveways and parking lots 146,400 Remodeling of office space in building, including new partitions and walls 193,200 Special assessment by city on land 21,600

3. On December 20, the company paid cash for equipment, $312,000, subject to a 2% cash discount, and freight on equipment of $12,600.

Prepare entries on the books of Monty 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.)

Answer 1

Date	Particulars	Debit ($)	Credit ($)
1.	Land	344,400
	Building	1033,200
	Equipment	688,800
	Common stock		1230,000
	Paid in capital in excess of par		836,400
	(To record acquisition of plant assets by equity)
2.	Buildings	319,200
	Equipment	162,000
	Land Improvements	146,400
	Land	21,600
	Cash		649,200
	(To record the capital expenditures)
3	Equipment	318,360
	Cash		318,360
	(To record purchase of equipment)

Working Notes

1.

Market Value of Stock: 12300 x $168 = $2,066,400

Common Stock: 12300 x 100 = $1,230,000

Paid in Capital in Excess of Common Stock: 2,066,400 –1,230,000 = $ 836,400

Amounts to include on statement –

Land: $2,066,400 X 300,000/1800,000 = $ 344,400

Buildings: $2,066,400 X 900,000/1800,000 = $ 1,033,200

Equipment: $2,066,400 X 600,000/1800,000 = $ 688,800

2.

Buildings = repairs + remodeling of office space = 126,000 + 193,200 = $ 319,200

Construction of bases for equipment is to be capitalized to equipment

Driveways and parking lots is to be capitalized to land improvements

Special assessment by city on land is to be added to cost of land.

3.

Cash discount is to be reduced from the purchase price of equipment.

Further, freight is to be added to the cost of equipment as it aids in bringing equipment to the condition for use, simply, being freight inward for assets.

Hence, equipment = 312,000 * 98 % +12,600 = $ 318,360

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