E9-18A

Learning Objective 1: Measure and record the cost of individual assets in a lump-sum purchase of assets) Advanced Automotive pays $210,000 for a group purchase of land, building, and equipment. At the time of acquisition, the land has a current market value of $66,000, the buildings current market value is $22,000, and the equipments current market value is $132,000. Journalize the lump-sum purchase of the three assets for a total cost of $210,000. The business signs a note payable for this amount.

E9-25A

(Learning Objective 2: Measure cash amounts for a bond payable (premium); amortize the bonds by the straight-line method) Town Bank has $100,000 of 7% debenture bonds outstanding. The bonds were issued at 105 in 2012 and mature in 2032.

Requirements

1. How much cash did Town Bank receive when it issued these bonds?

2. How much cash in total will Town Bank pay the bondholders through the maturity date of the bonds?

3. Take the difference between your answers to Requirements 1 and 2. This difference represents Town Banks total interest expense over the life of the bonds.

4. Compute Town Banks annual interest expense by the straight-line amortization method. Multiply this amount by 20. Your 20-year total should be the same as your answer to Requirement 3.