Reference no: EM1357038

During the current year, the Yellow Rose Company completed construction of a new assembly facility in Ocala, Florida. The facility will receive components from Yellow Rose other facilities and assemble them for shipment to distributors. The following transactions occurred in conjunction with the facility.

Item A: The City of Ocala provided Yellow Rose with a parcel of land at no cost in exchange for Yellow Rose constructing the facility in Ocala. The appraised value of the land was $750,000. The land had an abandoned city maintenance facility that Yellow Rose had demolished at a cost of $50,000.

Item B: Yellow Rose entered into a contract with the Ocala Construction Company (OCC) to build the manufacturing facility. The agreed to price of the construction was $5,500,000. The contract called for Yellow Rose to pay OCC $4,000,000 plus 30,000 shares of Yellow Rose common stock. The common stock has a $1 par value and, as Yellow Rose is a private corporation, the stock is not traded on any public stock exchange. The facility has been completed and the payment has been tendered to OCC.

Item C: The assembly process does not involve heavy machinery and is mostly completed by hand at assembly workstations. Yellow Rose received two bids from other companies to construct the necessary workstations. One bid was for $250,000 and the other was for $265,000. After considering the bids, Yellow Rose decided to construct the workstations for the new facility at another Yellow Rose facility. In doing so, Yellow Rose used $72,000 in materials from inventory and $87,000 in direct labor. That facility applies fixed overhead at 50% of direct labor cost.

Prepare the necessary journal entries to record the above items.