Example #$3$: Journalizing Acquisitions and Dispositions

A$.$ Eddard Co$.$ purchases land with $15,000$ shares of its $$1$ par value common stock. Eddard is publicly$-$

traded with a high trade volume and a market price of $$25$ per share. Provide the journal entry for

this acquisition. How would the journal entry change if the Eddard's stock were private or

thinly$-$traded? What additional information would you need in that case?

B$.$ Willie Corp. is enacting an exchange of biodiesel tractors that has commercial substance. Willie

Corp. is trading an old tractor that was originally purchased for $$17,000$ with $$4,000$ of accumulated

depreciation. A fair value appraisal of Willie's tractor priced it at $$15,000.$ No cash was exchanged.

Record the journal entry for Willie Corp. regarding this exchange. Suppose this was merely a

transaction for Willie Corp. to facilitate a sale, what would be the value of the newly acquired

tractor in this case?

C$.$ Thor Inc. is purchasing a new machine for its manufacturing facilities. In this agreement, Thor pays

$$75,000$ upfront in addition to signing a contract which obligates Thor to make payments of $$125,000$

at the end of the year and each year$-$end thereafter for five years. Thor Inc. has a discount rate of $4\%.$

$($note: the note's cash flows have a present value of $$556,478$ when discounted at a $4\%$ rate$)$ Record

the journal entry that accounts for this transaction.

D$.$ Bullwinkle Inc. purchased the mineral rights to drill oil on a farmer's property for $$250,000.$ The total

costs of developing and extracting the resource $($building roads, energy costs to fuel the drill and labor

costs of the crews working on the drill site$)$ amounted to $$125,000.$ Bullwinkle needed to purchase

$$30,000$ of specialized drill bits to break into the rock bed. It believes it can use these drill bits in this

and future extractions. Bullwinkle signed a contract requiring it to return the land to its original

condition in three years and expects the cost of that obligation to amount to $$175,000.$ Bullwinkle's

discount rate is $5\%.($note: the present value of $$175,000$ paid three years from now and discounted at

a $5\%$ rate is $$151,172)$ Record the journal entry or entries required to account for these

acquisitions. Please Provide step by step Instruction as well as appropriate journal entrys made avaliable for each account inside each point of the exercise!!