P8-1 (Algo) Explaining the Nature of a Long-Lived Asset and Determining and Recording the Financial Statement Effects of Its Purchase LO8-1, 8-2

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On January 2, Summers Company received a machine that the company had ordered with an invoice price of $106,000. Freight costs of $840 were paid by the vendor per the sales agreement. The company exchanged the following on January 2 to acquire the machine:

Issued 2,400 shares of Summers Company common stock, par value $1 (market value, $3.50 per share).

Signed a note payable for $52,000 with an 10.3 percent interest rate (principal plus interest are due April 1 of the current year).

The balance of the invoice price was on account with the vendor, to be paid in cash by January 12.

On January 3, Summers Company paid $1,800 cash for installation costs to prepare the machine for use.

On January 12, Summers Company paid the balance due on its accounts payable to the vendor.