Carla 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 foed-asset accountant, requested that Danny Nolte, Carla's controller, review the following transactions Transaction 1: On June 1, 2020, Carla Company purchased equipment from Wyandot Corporation. Carla issued a $30,000, 4-year, zero-interest-bearing note to Wyandot for the new equipment. Carla will pay off the note in four equal installments due at the end of each of the next 4 years. At the date of the transaction, the prevailing market rate of interest for obligations of this nature was 10%. Freight costs of $458 and installation costs of $500 were incurred in completing this transaction. The appropriate factors for the time value of money at a 10% rate of interest are given below. 146 Future value of $1 for 4 periods Future value of an ordinary annuity for 4 periods Present value of $1 for 4 periods Present value of an ordinary annuity for 4 periods 4.64 0.68 3.17 Transaction 2: On December 1, 2020, Carla Company purchased several assets of Yakima Shoes Inc., a small shoe manufacturer whose owner was retiring. The purchase amounted to $229,000 and included the assets listed below. Carla Company engaged the services of Tennyson Appraisal Inc., an independent appraiser, to determine the fair values of the assets which are also presented below. Inventory Land Buildings Yakima Book Value $56,500 41,600 71,100 $169,200 Fair Value $55,000 87,000 100,000 $250,000 During its fiscal year ended May 31, 2021, Carla incurred $8,350 for interest expense in connection with the financing of these assets. Transaction 3: On March 1, 2021. Carla Company exchanged a number of used trucks plus cash for vacant land adjacent to its plant site.(The exchange has commercial substance.) Carla intends to use the land for a parking lot. The trucks had a combined book value of $34,330, as Carla had recorded $21,510 of accumulated depreciation against these assets. Carla's purchasing agent who has had previous dealings in the secondhand market, indicated that the trucks had a fair value of $50,520 at the time of the transaction. In addition to the trucks, Carla Company paid $17.790 cash for the land. b) For each of the three transactions described above, determine the value at which Carla Company should record the acquired assets. (Round intermediate calculations to 5 decimal places. eg. 1.25124 and final answers to decimal places eg. 58,971.) Value Transaction 1 $ Transaction 2 Inventory $ Land $ Building $ Transaction 3
