Question
Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2014. The
Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2014. The terms of acquisition for each truck are described below.
1. Truck #1 has a list price of $24,675 and is acquired for a cash payment of $22,866.
2. Truck #2 has a list price of $26,320 and is acquired for a down payment of $3,290 cash and a zero-interest-bearing note with a face amount of $23,030. The note is due April 1, 2015. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
3. Truck #3 has a list price of $26,320. It is acquired in exchange for a computer system that Clarkson carries in inventory. The computer system cost $19,740 and is normally sold by Clarkson for $25,004. Clarkson uses a perpetual inventory system.
4. Truck #4 has a list price of $23,030. It is acquired in exchange for 1,060 shares of common stock in Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share.
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