Assets 1 and 2
These assets were purchased as a lump sum of $104,000 cash. The following information was gathered.
Desc: Intial cost of depre. to date Book Value on Appraised Value
sellers books on seller's book Seller's books
Machinery $100,000 $50,000 $50,000 $90,000
Off. Equip. 60,000 10,000 50,000 30,000
This machine was acquired by making a $10,000 down payment and issuing a $30,000, 2-year zero-interest-bearing note. The note is to be paid off in two $15,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $35,000
This machinery was acquired by trading in used machinery. (the exchange lacks commercial substance). Facts concerning the trade-in are as follows:
Cost of machinery traded $100,000
Accum. depre. to date of sale 36,000
Fair value of machinery traded 80,000
Cash received 10,000
Fair value of machinery acquired 70,000
Office equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market value of$11 per share.
Construction of Building
A building was constructed on land purchased last year at a cost of $180,000. Construction began on Feb. 1 and was completed on Nov. 1. The payments to the contractor were as follows
To finance construction of the building, a $600,000, 12% construction loan was taken out of February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%
Record the acquisition of each of these assets.
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