Question

Below are transactions related to Sweet Company.

(a)		The City of Pebble Beach gives the company 5 acres of land as a plant site. The fair value of this land is determined to be $84,030.
(b)		13,000 shares of common stock with a par value of $51 per share are issued in exchange for land and buildings. The property has been appraised at a fair value of $840,300, of which $163,750 has been allocated to land and $676,550 to buildings. The stock of Sweet Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $66 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $59 per share.
(c)		No entry has been made to remove from the accounts for Materials, Direct Labor, and Overhead the amounts properly chargeable to plant asset accounts for machinery constructed during the year. The following information is given relative to costs of the machinery constructed.

Materials used		$13,470
Factory supplies used		812
Direct labor incurred		14,890
Additional overhead (over regular) caused by construction of machinery, excluding factory supplies used		2,846
Fixed overhead rate applied to regular manufacturing operations		60% of direct labor cost
Cost of similar machinery if it had been purchased from outside suppliers		39,770

Prepare journal entries on the books of Sweet Company to record these transactions.

No. Account Titles and Explanation Debit Credit

Answer 1

SOLUTION

S.No.	Accounts titles and Explanation	Debit ($)	Credit ($)
a.	Land	84,030
	Contribution Revenue		84,030
b.	Land	163,750
	Buildings	676,550
	Common Stock (13,000*$51))		663,000
	Additional Paid-in Capital		177,300
c.	Machinery	40,952
	Materials		13,470
	Direct Labor		14,890
	Factory Overhead*		12,592

*Factory Overhead

Fixed overhead applied (14,890*60%)	8,934
Additional overhead	2,846
Factory supplies used	812
Factory Overhead	12,592