Exercise 10 16 Sandhill 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 $340,000 cash The following information was gathered Description Initial Cost on Sellers Books Depreciation to Date on Sellers Books Book Value on Sellers Books Appraised Value Machinery $340,000 $170,000 $170,000 $306,000 Equipment 204,000 34,000 170,000 102,000 Asset 3 This machine was acquired by making a $34,000 down payment and issuing a $102,000, 2 year, zero interest bearing note The note is to be paid off in two $51,000 installments made at the end of the first and second years It was estimated that the asset could have been purchased outright for $122,060 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 $340,000 Accumulated depreciation to date of sale 136,000 Fair value of machinery traded 272,000 Cash received 34,000 Fair value of machinery acquired 238,000 Asset 5 Equipment was acquired by issuing 100 shares of $27 par value common stock The stock had a market price of $37 per share Construction of Building A building was constructed on land purchased last year at a cost of $510,000 Construction began on February 1 and was completed on November 1 The payments to the contractor were as follows Date Payment 2 1 $408,000 6 1 1,224,000 9 1 1,632,000 11 1 340,000 To finance construction of the building, a $2,040,000, 12 construction loan was taken out on February 1 The loan was repaid on November 1 The firm had $680,000 of other outstanding debt during the year at a borrowing rate of 8 Equipment 170000 Cash 340000 Acquisition of Asset Machinery Discount on Notes Payable 122060 20060 34000 Cash Notes Payable Acquisition of Asset 4 Machinery Accumulated Depreciation Cash 102000 178500 Machinery 136000 34000 Machinery 340000 Gain on Disposal of Machinery 8500 Acquisition of Asset 5 Equipment 3700 Common Stock 2700 Paid in Capital in Excess of Par Common Stock (To record acquisition of Office Equipment) Land 1000 510000 Buildings Cash Interest Expense

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 15, 2024

Exercise 10-16 Sandhill Industries purchased the following assets and constructed a building as well. All this was done during the current year. Assets 1 and

Exercise 10-16

Sandhill 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 $340,000 cash. The following information was gathered.

Description	Initial Cost on Sellers Books	Depreciation to Date on Sellers Books	Book Value on Sellers Books	Appraised Value
Machinery	$340,000	$170,000	$170,000	$306,000
Equipment	204,000	34,000	170,000	102,000

Asset 3: This machine was acquired by making a $34,000 down payment and issuing a $102,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $51,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $122,060. 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		$340,000
Accumulated depreciation to date of sale		136,000
Fair value of machinery traded		272,000
Cash received		34,000
Fair value of machinery acquired		238,000

Asset 5: Equipment was acquired by issuing 100 shares of $27 par value common stock. The stock had a market price of $37 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $510,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows.

Date		Payment
2/1		$408,000
6/1		1,224,000
9/1		1,632,000
11/1		340,000

To finance construction of the building, a $2,040,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $680,000 of other outstanding debt during the year at a borrowing rate of 8%.

image text in transcribed

Equipment 170000 Cash 340000 Acquisition of Asset Machinery Discount on Notes Payable 122060 20060 34000 Cash Notes Payable Acquisition of Asset 4 Machinery Accumulated Depreciation Cash 102000 178500 -Machinery 136000 34000 Machinery 340000 Gain on Disposal of Machinery 8500 Acquisition of Asset 5 Equipment 3700 Common Stock 2700 Paid-in Capital in Excess of Par - Common Stock (To record acquisition of Office Equipment) Land 1000 510000 Buildings Cash Interest Expense