Question
Part 1: Meurer, Inc. purchased the following assets and constructed a building as well. All this was done during the current year. Assets 1& 2
Part 1:
Meurer, Inc. purchased the following assets and constructed a building as well. All this was done during the current year.
Assets 1& 2
These assets were purchased as a lump sum for $186,000 cash. The following information was gathered.
Description | Initial Cost on Seller's Books | Depreciation to Date on Seller's Books | Book Value on Seller's Books | Appraised Value |
Machinery | $65,000 | $30,000 | $35,000 | $160,000 |
Office Furniture | 25,000 | 10,000 | 15,000 | 40,000 |
Asset 3
This machinery was acquired by trading in used machinery. (The exchange lacks commercial substance.) Facts concerning the trade-in as follows.
Cost of machinery traded | $150,000 |
Accumulated depreciation to date of sale | 60,000 |
Fair value of machinery traded | 96,000 |
Cash Received | 20,000 |
Fair value of machinery acquired | 76,000 |
Asset 4:
Machinery was acquired by issuing 1,000 shares of $1 par value common stock. The stock had a market value of $7 per share.
Asset 5:
Truck has a list price of $20,000 and is acquired on April 1, 2015 with a down payment of $3,000 cash and a zero-interest-bearing note with a face amount of $16,000. The note is due April 1, 2016. Meurer, Inc. 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%.
Asset 6:
Construction of Building
A building was constructed on land (purchased on March 1 with cash) at a cost of $120,000. Construction began on March 1 and was completed on September 1. The payments to the contractor were as follows.
Date | Payment |
3/1 | $200,000 |
5/1 | 300,000 |
6/1 | 100,000 |
9/1 | 400,000 |
To finance construction of the building a $600,000, 10% construction loan was taken out on March 1. The loan was repaid on September 1. The firm had $400,000 of other outstanding debt during the year at a borrowing rate of 12%.
Required:
Record the acquisition (journal entry) for each of these assets. Note: for Asset 6, no need to record a journal entry, just record the land and building acquisition cost as of September 1.
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