Problem 1: Below are transactions related to Marin 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 $85,170.
(b) 13,000 shares of common stock with a par value of $52 per share are issued in exchange for land and buildings. The property has been appraised at a fair value of $851,700, of which $179,010 has been allocated to land and $672,690 to buildings. The stock of Marin Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $68 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $60 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 $12,420
Factory supplies used 874
Direct labor incurred 17,250
Additional overhead (over regular) caused by construction of machinery, excluding factory supplies used 2,700
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 43,730.
Prepare journal entries on the books of Marin Company to record these transactions.
Problem 2: Pronghorn Inc. has decided to purchase equipment from Central Michigan Industries on January 2, 2020, to expand its production capacity to meet customers' demand for its product. Pronghorn issues a(n) $1,680,000, 5-year, zero-interest-bearing note to Central Michigan for the new equipment when the prevailing market rate of interest for obligations of this nature is 12%. The company will pay off the note in five $336,000 installments due at the end of each year over the life of the note.
Prepare the journal entry at the date of purchase.
Prepare the journal entry at the end of the first year to record the payment and interest, assuming that the company employs the effective-interest method.
Prepare the journal entry at the end of the second year to record the payment and interest.
Assuming that the equipment had a 10-year life and no salvage value, prepare the journal entry necessary to record depreciation in the first year.
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