Question
Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year. Assets 1 and 2:
Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year.
Assets 1 and 2:
These assets were purchased as a lump sum for $110,000 cash. The following was gathered:
Description | Initial Cost on Sellers Books | Depreciation to Date on Sellers Books | Book Value on Sellers Books | Appraised Value |
Machinery | $100,000 | $40,000 | $60,000 | $81,000 |
Office Equipment | 70,000 | 25,000 | 45,000 | 44,000 |
Asset 3:
Office Equipment was acquired by issuing 300 shares of $6 par value common stock. The stock had a market value of $14 per share.
Construction of Building
A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows:
Date | Payment |
2/1 | $100,000 |
6/1 | 380,000 |
9/1 | 460,000 |
11/1 | 120,000 |
To finance construction of the building, a $600,000 10% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 7%.
Required:Record all of the applicable acquisition/construction entries for each of these assets.
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