Garrett Corporation paid $200,000 to acquire land, buildings, and equipment. At the time of acquisition, Garrett paid $20,000 for an appraisal, which revealed the following values: land, $100,000; buildings, $125,000; and equipment, $25,000.
Required:
1. What cost should the company assign to the land, buildings, and equipment, respectively? 2. Assume that Garrett uses IFRS and chooses to use the revaluation model to value its property, plant, and equipment. At the end of the year, the book value of the land, buildings, and equipment are $88,000, $104,000, and $18,000, respectively. The company determines that the fair value of the land, buildings, and equipment at the end of year is $110,000, $106,000, and $15,000, respectively. Prepare the journal entries that Garrett should make to value its property, plant, and equipment.
Garrett Corporation paid $200,000 to acquire land, buildings, and equipment. At the time of acquisition, Garrett paid $20,000 for an appraisal, which revealed the following values: land, $100,000; buildings, $125,000; and equipment, $25,000.
Required:
| 1. | What cost should the company assign to the land, buildings, and equipment, respectively? |
| 2. | Assume that Garrett uses IFRS and chooses to use the revaluation model to value its property, plant, and equipment. At the end of the year, the book value of the land, buildings, and equipment are $88,000, $104,000, and $18,000, respectively. The company determines that the fair value of the land, buildings, and equipment at the end of year is $110,000, $106,000, and $15,000, respectively. Prepare the journal entries that Garrett should make to value its property, plant, and equipment. |
Related questions
Plant acquisitions for selected companies are as follows.
1. Pearl Industries Inc. acquired land, buildings, and equipment from a bankrupt company, Torres Co., for a lump-sum price of $812,000. At the time of purchase, Torresâs assets had the following book and appraisal values.
| Book Values | Appraisal Values | |||||
| Land | $232,000 | $174,000 | ||||
| Buildings | 290,000 | 406,000 | ||||
| Equipment | 348,000 | 348,000 | ||||
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
| Land | 174,000 | |||
| Buildings | 290,000 | |||
| Equipment | 348,000 | |||
| Cash | 812,000 |
2. Martinez Enterprises purchased store equipment by making a $2,320 cash down payment and signing a 1-year, $26,680, 10% note payable. The purchase was recorded as follows.
| Equipment | 31,668 | |||
| Cash | 2,320 | |||
| Notes Payable | 26,680 | |||
| Interest Payable | 2,668 |
3. Sandhill Company purchased office equipment for $18,000, terms 2/10, n/30. Because the company intended to take the discount, it made no entry until it paid for the acquisition. The entry was:
| Equipment | 18,000 | |||
| Cash | 17,640 | |||
| Purchase Discounts | 360 |
4. Teal Inc. recently received at zero cost land from the Village of Cardassia as an inducement to locate its business in the Village. The appraised value of the land is $31,320. The company made no entry to record the land because it had no cost basis.
5. Flint Company built a warehouse for $696,000. It could have purchased the building for $858,400. The controller made the following entry.
| Buildings | 858,400 | |||
| Cash | 696,000 | |||
| Profit on Construction | 162,400 |
Prepare the entry that should have been made at the date of each acquisition
