Intermediate Accounting: Reporting and Analysis
2nd Edition
ISBN: 9781285453828
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2P
To determine
Journalize entries to record all the preceding events.
Expert Solution & Answer
Explanation of Solution
Property, Plant, and Equipment:
Property, Plant, and Equipment refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.
Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.
Accounting rules for Journal entries:
- To record increase balance of account: Debit assets, expenses, losses and credit liabilities, capital, revenue and gains.
- To record decrease balance of account: Credit assets, expenses, losses and debit liabilities, capital, revenue and gains
Prepare journal entries:
| Date | Account titles and explanation | Debit ($) | Credit ($) |
| Investment in Land | 74,000 | ||
| Cash | 74,000 | ||
| (To record the land acquired) | |||
| Land (1) | 50,000 | ||
| Buildings (2) | 150,000 | ||
| Common Stock, $3 par | 60,000 | ||
| Additional Paid-In Capital on Common Stock | 140,000 | ||
| (To record the buildings land acquired through issuance of common stock) | |||
| Equipment | 153,000 | ||
| Repair and Maintenance Expense | 2,000 | ||
| Cash | 155,000 | ||
| ( To record the expenses associated with equipment) | |||
| Land Improvements | 30,000 | ||
| Cash | 30,000 | ||
| (To record the instalment of new parking lot) | |||
| Land (5) | 60,000 | ||
| Buildings (6) | 78,000 | ||
| Investment in Land | 37,000 | ||
| Cash | 101,000 | ||
| ( To record the costs associated with land and building) | |||
| Leasehold Improvements | 20,000 | ||
| Cash | 20,000 | ||
| (To record the leasehold improvements) | |||
| Equipment | 32,000 | ||
| Cash | 32,000 | ||
| ( To record the purchase of equipment) | |||
| Royalty Expense | 12,000 | ||
| Cash | 12,000 | ||
| ( To record the royalty payments) |
Table (1)
Working notes:
(1) Calculate the amount of land:
(2) Calculate the amount of buildings (factory):
(3) Calculate the value of common stock:
(4) Calculate the amount of equipment:
(5) Calculate the amount of land:
Note: $37,000 is the half value of land acquired
(6) Calculate the amount of buildings:
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The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018:
January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days.
January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days.
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The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018:
January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days.
January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days.
January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days.
January 31: Donahoo sold $500,000 worth of furniture, for which it had paid $400,000. The furniture was sold for 10 percent cash down, with the remainder payable in 90 days. In addition, the firm paid a cash dividend of $100,000 to its stockholders and paid off…
The Donahoo Western Furnishings Company was formed on December 31, 2017, with $1,000,000 in equity plus $500,000 in long-term debt. On January 1, 2018, all the firm's capital was held in cash. The following transactions occurred during January 2018:
January 2: Donahoo purchased $1,000,000 worth of furniture for resale. It paid $500,000 in cash and financed the balance using trade credit that required payment in 60 days.
January 3: Donahoo sold $250,000 worth of furniture that it had paid $200,000 to acquire. The entire sale was on credit terms of net 90 days.
January 15: Donahoo purchased more furniture for $200,000. This time, it used trade credit for the entire amount of the purchase, with credit terms of net 60 days.
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Chapter 10 Solutions
Intermediate Accounting: Reporting and Analysis
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