Intermediate Accounting 1B

PROBLEM 3: EXERCISES 1. One of the most critical steps in recording the acquisition of assets is the determination of the cost assigned to the asset. Data related to assets acquired by Mentor Manufacturing Company are as follows: (1) Machine A was purchased at a list price of P92,000; terms 1/10, net 30. The machine invoice was paid after the discount period. Transportation charges were P1,270; installation costs were P920; and the cost of a trial run was P960. Normal repairs and maintenance for the first year were P410. (2) Machine B could be purchased for five annual payments of P6,332 or P29,400 in cash. Mentor elected to purchase Machine B under the installment plan. Other related acquisition costs totaled P175. (3) On June 29, 2,125 shares of Mentor common stock were issued in exchange for land. The par value of the stock was P20 per share; the market value of the stock was P32 per share at the time of purchase. (4) The company purchased equipment under a deferred payment contract-- P40,000 down payment and 30 semiannual payments of P5,000. (Assume a 12 percent interest rate.) Requirement: Determine the acquisition cost for each of the assets