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P10-2 (Classification of Acquisition Costs) Selected accounts included
in the property, plant, and equipment section of Lobo
Corporation%u2019s balance sheet at December 31, 2013, had the
following balances.
Land $ 300,000
Land improvements 140,000
Buildings 1,100,000
Equipment 960,000
During 2014, the following transactions occurred.
1. A tract of land was acquired for $150,000 as a potential future
building site.
2. A plant facility consisting of land and building was acquired from
Mendota Company in exchange
for 20,000 shares of Lobo%u2019s common stock. On the acquisition
date, Lobo%u2019s stock had a closing market
price of $37 per share on a national stock exchange. The plant facility
was carried on Mendota%u2019s
books at $110,000 for land and $320,000 for the building at the
exchange date. Current appraised
values for the land and building, respectively, are $230,000 and
$690,000.
3. Items of machinery and equipment were purchased at a total cost of
$400,000. Additional costs were
incurred as follows.
Freight and unloading $13,000
Sales taxes 20,000