Asset Acquisition Logan Industries purchased the following assets and constructed a building as well. All this was

Question:

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.

Asset 3

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 $35,900.

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 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 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%.Record the acquisition of each of these assets.

Depreciation
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