Transactions Involving Property
The following transactions were completed by Space Age Toy Co. during 2008:
Mar. 1 Purchased real property for $628,250, which included a charge of $18,250 representing property tax for March 1–June 30 that had been prepaid by the vendor; 20% of the purchase price is deemed applicable to land and the balance to buildings. A mortgage of $375,000 was assumed by Space Age Toy Co. on the purchase. Cash was paid for the balance. 30 Previous owners had failed to take care of normal maintenance and repair requirements on the building, necessitating current reconditioning at a cost of $29,600.
May 15 Demolished garages in the rear of the building, $4,500 being recovered on the lumber salvage. The company proceeded to construct a warehouse. The cost of such construction was $67,600, which was almost exactly the same as bids made on the construction by independent contractors. Upon completion of construction, city inspectors ordered extensive modifications to the building as a result of failure on the part of the company to comply with the building safety code. Such modifications, which could have been avoided, cost $9,600.
June 1 The company exchanged its own stock with a fair market value of $40,000 (par $3,000) for a patent and a new toy-making machine. The machine has a market value of $25,000.
July 1 The new machinery for the new building arrived. In addition to the machinery, a new franchise was acquired from the manufacturer of the machinery to produce toy robots. Payment was made by issuing bonds with a face value of $50,000 and by paying cash of $18,000. The value of the franchise is set at $20,000, while the machine’s fair market value is $45,000.
Nov. 20 The company contracted for parking lots and landscaping at a cost of $45,000 and $9,600, respectively. The work was completed and paid for on November 20.
Dec. 31 The business was closed to permit taking the year-end inventory. During this time, required redecorating and repairs were completed at a cost of $7,500.
Instructions: Give the journal entries to record each of the preceding transactions.(Disregard depreciation.)
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