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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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