On July 6, Zonker Company acquired the plant assets of Doonesbury Company, which had discontinued operations. The appraised value of the property is:

Land $ 400,000 Buildings 1,200,000 Equipment 800,000 Total $2,400,000

Zonker Company gave 12,500 shares of its $100 par value common stock in exchange. The stock had a market price of $168 per share on the date of the purchase of the property.

The journal entry is shown below:

Land A/c Dr $350,000

Building A/c Dr $1,050,000

Equipment A/c $700,000

To Common stock A/c $1,250,000 (12,500 shares * $100)

To Paid - in capital in excess of par - Common stock A/c $850,000

(Being the allocation cost is recorded)

The computation is shown below:

Since the appraisal value of the property is

Particulars Ratio Allocated amount

Land $ 400,000 (A) 1 : 6 (A : D) $350,000

Buildings $1,200,000 (B) 1 : 2 (B : D) $1,050,000

Equipment $800,000 (C) 1 : 3 (C : D) $700,000

Total $2,400,000 (D) $2,100,000

Total amount

= 12,500 shares * $168 per share

= $2,100,000