Reference no: EM132615207
The following are transactions related to Pharoah Limited:
1. The City of Piedmont gives the company five hectares of land as a plant site. This land's fair value is determined to be $91,900.
2. Pharoah issues 12,890 common shares in exchange for land and buildings. The property has been appraised at a fair value of $1,629,110, of which $406,940 has been allocated to land, $886,610 to the structure of the buildings, $219,890 to the building HVAC (heating, ventilation, air conditioning), and $115,670 to the interior coverings in the buildings (such as flooring). Pharoah's shares are not listed on any exchange, but a block of 91 shares was sold by a shareholder 12 months ago at $56 per share, and a block of 200 shares was sold by another shareholder 18 months ago at $31 per share.
3. No entry has been made to remove amounts for machinery constructed during the year that were charged to the accounts Inventory, Supplies, and Salaries and Wages Expense and should have been charged to plant asset accounts.
The following information relates to the costs of the machinery that was constructed:
Construction materials on hand in opening inventory used $22,530
Direct materials used in calibrating the equipment 485
Supplies used 960
Direct labour incurred 55,900
Additional variable overhead (over regular) caused by construction
of machinery, excluding supplies used (charged to Inventory) 8,480
Fixed overhead rate applied to regular manufacturing operations 63% of direct labour cost
Lost revenue due to downtime during construction 45,000
Cost of similar machinery if it had been purchased from outside suppliers 124,570
Question 1: Prepare journal entries on the books of Pharoah Limited to record these transactions. Assume that Pharoah Limited prepares financial statements in accordance with IFRS. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)