In January 2019, Cordova Company entered into a contract to acquire a new machine for its factory. The machine, which has a cash price of $210,000, was paid for as follows: $50,000 Down payment Note payable in 4 equal annual payments starting in January 2020 600 shares of Cordova preferred stock with a mutually agreed value of $100 per share (par value $100) $120,000 $60,000 Fair rate of interest on the non-interest-bearing note 10% Required: 1. Determine the cost of the machine. What principle guides the determination of the cost of the machine? 2. Prepare the journal entry to record the acquisition of the machine. 3. Next Level How would your answer change, if at all, if the $210,000 cash price were not available? Chart of Accounts ASSETS REVENUE 111 Cash 411 Sales Revenue 121 Accounts Receivable 141 Inventory EXPENSES 500 Cost of Goods Sold 511 Insurance Expense 152 Prepaid Insurance 181 Equipment 184 Machine 198 Accumulated Depreciation 512 Utilities Expense 521 Salaries Expense 532 Bad Debt Expense LIABILITIES 540 Interest Expense 211 Accounts Payable 541 Depreciation Expense 221 Notes Payable 559 Miscellaneous Expenses 222 Discount on Notes Payable 910 Income Tax Expense 231 Salaries Payable 250 Unearned Revenue 261 Income Taxes Payable EQUITY 311 Common Stock 312 Preferred Stock 314 Additional Paid-In Capital on Preferred Stock 331 Retained Earnings 1. What principle guides the determination of the cost of the machine? Select the statement that best supports the entry to record the cost of the machine. O Assets acquired through the exchange of stock are recorded at the fair value of the stock. O Assets acquired on a deferred-payment basis are recorded at the fair value of the liability. O If the fair value of the asset received is more clearly evident than the fair value of the asset surrendered, it can be used to measure the cost of the asset acquired. When more than one asset is acquired for a single lump-sum purchase price, the purchase price is allocated to the individual assets based on their relative fair values. 2. Prepare the journal entry to record the acquisition of the machine on January 1. General Journal Instructions PAGE 10 GENERAL JOURNAL DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT 3. How would your answer change, if at all, if the $210,000 cash price were not available? Select the statement that supports how the entry to record the acquisition of the machine would change if the $210,000 cash price were not available. O The cost of the machine is the discounted note payable plus the preferred stock issued plus the cash paid. O The cost of the machine is the note payable plus the preferred stock. The cost of the machine is the book value to the seller. The cost of the machine is the note payable plus the preferred stock issued less cash paid