Question

Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

1. The equipment was purchased on account for $29,000. Credit terms were 2/10, n/30. Payment was made within the discount period and the company records the purchases of equipment net of discounts.
2. Connors gave the seller a noninterest-bearing note. The note required payment of $31,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 11% properly reflects the time value of money in this situation.
3. Connors traded in old equipment that had a book value of $8,000 (original cost of $18,000 and accumulated depreciation of $10,000) and paid cash of $26,000. The old equipment had a fair value of $4,100 on the date of the exchange. The exchange has commercial substance.
4. Connors issued 2,000 shares of its nopar common stock in exchange for the equipment. The market value of the common stock was not determinable. The equipment could have been purchased for $28,000 in cash.

Required:
For each of the above situations, prepare the journal entry required to record the acquisition of the equipment. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)

Answer 1

Journal Entries :-

S. No.	Particulars	Debit($)	Credit($)
1)	Equipment A/c ($29000-($29000*2%))	28420
	Cash A/c		28420
	(Being Equipment purchase on cash and cash paid in discount period)
2)	Equipment A/c ($31000*(1/1.11))	27928
	Discount on Notes Payable A/c ($31000-$27928)	3072
	Notes Payable A/c		31000
	(Being equipment purchased against non-interest Note Payable)
3)	New Equipment A/c ($26000+$4100)	30100
	Accumulated Depreciation A/c	10000
	Loss on Exchange A/c ($8000-$4100)	3900
	Old Equipment A/c		18000
	Cash A/c		26000
	(Being New Equipment purchase against old equipment)
4)	Equipment A/c	28000
	Common Stock A/c		28000
	(Equipment Purchased against common stock)

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