Lo-Dun Inc. is a publicly traded financial services company. The company recently acquired two assets in the
Question:
Lo-Dun Inc. is a publicly traded financial services company. The company recently acquired two assets in the following transactions:
Transaction 1: Lo-Dun acquired a new computer system to assist with its programmed trading activities. The computer system had a list price of $85,000, but the salesperson indicated that the price could likely be negotiated down to $80,000. After further negotiation, the company acquired the asset by issuing 15,000 of its own common shares. At the time of the transaction, the shares were actively trading at $5.25 per share.
Transaction 2: Lo-Dun acquired new office furniture by making a down payment of $5,000 and issuing a non-interest bearing note with a face amount of $45,000. The note is due in one year. The market rate of interest for similar transactions is 9%.
Required: Prepare the journal entries for Lo-Dun Inc. to record the transactions. Provide a rationale for the amount recorded for each item.
Step by Step Answer:
Intermediate Financial Accounting Volume 1
ISBN: 9781539980674
1st Edition
Authors: Glenn Arnold, Suzanne Kyle, Lyryx Learning