(Asset Acquisition) Logan 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 $104,000 cash. The following information was gathered.
|
Description |
Initial Cost on Seller’s Books |
Depreciation to Date on Seller’s Books |
Book Value on Seller’s Books |
Appraised Value |
|
Machinery |
$100,000 |
$50,000 |
$50,000 |
$90,000 |
|
Equipment |
60,000 |
10,000 |
50,000 |
30,000 |
Asset 3
This machine was acquired by making a $10,000 down payment and issuing a $30,000, 2 year, zerointerest 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 $35,900.
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 |
$100,000 |
|
Accumulated depreciation to date of sale |
36,000 |
|
Fair value of machinery traded |
80,000 |
|
Cash received |
10,000 |
|
Fair value of machinery acquired |
70,000 |
Asset 5
Office equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market price 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 February 1 and was completed on November 1. The payments to the contractor were as follows.
|
Date |
Payment |
|
2/1 |
$120,000 |
|
6/1 |
360,000 |
|
9/1 |
480,000 |
|
11/1 |
100,000 |
To finance construction of the building, a $600,000, 12% construction loan was taken out on 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%.
Instructions
Record the acquisition of each of these assets.