Question

Exercise 10-12

Below are transactions related to Monty 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 $74,980.
(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 $749,800, of which $179,660 has been allocated to land and $570,140 to buildings. The stock of Monty Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $67 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		$11,400
Factory supplies used		844
Direct labor incurred		15,460
Additional overhead (over regular) caused by construction of machinery, excluding factory supplies used		2,544
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		41,330

Prepare journal entries on the books of Monty Company to record these transactions. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

No. Account Titles and Explanation Debit Credit

Answer 1

NO	Accounts Title and explanation	Debit	Credit
(a)	Land	$ 74,980
	Contribution Revenue		$ 74,980
(b)	Buildings	$ 570,140
	Land	$ 179,660
	Common stock (13000 shares * $ 52 per share )		$ 676,000
	Additional paid in capital in excess of par (bal in fig)		$ 73,800
C )	Machinery (11,400+15,460 +12,664 )	$ 39,524
	Materials		$ 11,400
	Direct labor		$ 15,460
	Factory overhead ( see note 1 )		$ 12,664

NOTE 1 :

To find out Factory Overhead :
Factory overhead applied ( $ 15,460 *60 % )	$ 9,276
Additional overhead caused by Construction of machinery	$ 2,544
Factory Supplies used	$ 844
	$ 12,664