Exercise 10-16 Stellar 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 Initial Cost on Seller's Books $340,000 204,000 Depreciation to Date on Seller's Books Book Value on Seller's Books $170,000 170,000 Appraised Value Description Machinery $170,000 34,000 $306,000 102,000 Equipment 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received $340,000 136,000 272,000 34,000 238,000 Fair value of machinery acquired Exercise 10-16 Stellar 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 Initial Cost on Seller's Books $340,000 204,000 Depreciation to Date on Seller's Books Book Value on Seller's Books $170,000 170,000 Appraised Value Description Machinery $170,000 34,000 $306,000 102,000 Equipment 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received $340,000 136,000 272,000 34,000 238,000 Fair value of machinery acquired