Novak Industries purchased the following assets and constructed
a building as well. All this was done during the current
year.
Assets 1 and 2: These assets were purchased as a
lump sum for $300,000 cash. The following information was
gathered.
Description |
Initial Cost on |
Depreciation to |
Book Value on |
Appraised Value |
||||||||
Machinery | $300,000 | $150,000 | $150,000 | $270,000 | ||||||||
Equipment | 180,000 | 30,000 | 150,000 | 90,000 |
Asset 3: This machine was acquired by making a
$30,000 down payment and issuing a $90,000, 2-year,
zero-interest-bearing note. The note is to be paid off in two
$45,000 installments made at the end of the first and second years.
It was estimated that the asset could have been purchased outright
for $107,700.
Asset 4: 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 | $300,000 | |
Accumulated depreciation to date of sale | 120,000 | |
Fair value of machinery traded | 240,000 | |
Cash received | 30,000 | |
Fair value of machinery acquired | 210,000 |
Asset 5: Equipment was acquired by issuing 100
shares of $24 par value common stock. The stock had a market price
of $33 per share.
Construction of Building: A building was
constructed on land purchased last year at a cost of $450,000.
Construction began on February 1 and was completed on November 1.
The payments to the contractor were as follows.
Date |
Payment |
||
2/1 | $360,000 | ||
6/1 | 1,080,000 | ||
9/1 | 1,440,000 | ||
11/1 | 300,000 |
To finance construction of the building, a $1,800,000, 12%
construction loan was taken out on February 1. The loan was repaid
on November 1. The firm had $600,000 of other outstanding debt
during the year at a borrowing rate of 8%.
Record the acquisition of each of these assets. (Round
intermediate calculations to 5 decimal places, e.g. 1.25124 and
final answer to 0 decimal places e.g. 58,971. Credit account titles
are automatically indented when 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.)
Account Titles and Explanation |
Debit |
Credit |
Acquisition of Assets 1 and 2 |
||
Acquisition of Asset 3 |
||
Acquisition of Asset 4 |
||
Acquisition of Asset 5 |
||
(To record acquisition of Office Equipment) |
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