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 $88,510. (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 $885,100, of which $163,640 has been allocated to land and $721,460 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

Answer and Explanation:

As question is completed, please find the information below:

The following information is given relative to costs of the machinery constructed. $11,680 936 Materials used Factory supplies used Direct labor incurred Additional overhead (over regular) caused by construction of machinery, excluding factory supplies used 17,160 2,882 60% of direct labor cost Fixed overhead rate applied to regular manufacturing operations Cost of similar machinery if it had been purchased from outside suppliers 41,130. Prepare journal entries on the books of Whispering Company to record these transactions.

The journal entries are shown below

a) Land Dr  $88,510

              To grand revenue $88,510

(Being the fair value of the land is recorded)

b) Building Dr $721,460

      Land Dr $163,460

            To Common stock  $676,000 ( 13,000 × $52)

            To Additional paid in capital in excess of par $209,100

(Being the common stock is exchanged with the building and land)

c) Machinery Dr $42,954

          To Direct labor   $17,160

           To Factory overhead A/c  $14,114

          To Materials A/c  $11,680

(Being the overhead is recorded)

Because fair value of stock is not definable, so the fair value of property is used as base value to issue the shares.

The computation of the factory overhead is shown below:

Fixed overhead applied $10,296 ($17,160 × 60%)

Add: Additional overhead $2,882

Add: Factory supply $936

Total                     $14,114

a

explanation:

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