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Blue Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the
Blue Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its product, the company recently made several acquisitions of plant and equipment. Rob Joffrey, newly hired in the position of fixedasset accountant, requested that Danny Nolte, Blue's controller, review the following transactions.
Transaction : On June Blue Company purchased equipment from Wyandot Corporation. Blue issued a $year, zerointerestbearing note to Wyandot for the new equipment. Blue will pay off the note in four equal installments due at the end of each of the next years. At the date of the transaction, the prevailing market rate of interest for obligations of this nature was Freight costs of $ and installation costs of $ were incurred in completing this transaction. The appropriate factors for the time value of money at a rate of interest are given below.
Future value of $ for periods
Future value of an ordinary annuity for periods
Present value of $ for periods
Present value of an ordinary annuity for periods
Transaction : On December Blue Company purchased several assets of Yakima Shoes Inc., a small shoe manufacturer whose owner was retiring. The purchase amounted to $ and included the assets listed below. Blue Company engaged the services of Tennyson Appraisal Inc., an independent appraiser, to determine the fair values of the assets which are also presented below.
tableYakima Book Value,,Fair ValueInventory$$
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