Determination of Acquisition Cost In January 2007 Cordova Company entered into a contract to acquire a new machine for its factory. The machine, which has a cash price of $215,000, was paid for as follows:
|
Down payment |
$55,000 |
|
Note payable in four equal annual payments starting in January 2008 |
120,000 |
|
600 shares of Cordova preferred stock with a mutually agreed value of $100 per share (par value $100) |
60,000 |
|
Fair rate of interest on the non interest bearing note |
10% |
Required
1. Prepare the journal entry to record the acquisition of the machine.
2. How would your answer change, if at all, if the $215,000 cash price were not available?