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Pearl Industries Inc. constructed a building and acquired five assets during the current year. Construction of Building: A building was constructed on land purchased last
Pearl Industries Inc. constructed a building and acquired five assets during the current year. Construction of Building: A building was constructed on land purchased last year at a cost of $201,600. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment March 1 $302,400 July 1 231,000 October 1 273,000 Pearl obtained a $588,000, 8% construction loan on March 1. Pearl repaid the loan on October 1. Pearl had $336,000 of other outstanding debt during the year at a borrowing rate of 9%. Asset 1: Pearl acquired office furniture by making a $6,300 down payment and issuing a $8,400, 2-year, zero-interest-bearing note. The note is to be paid off in two $4,200 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $13,608. Asset 2: Pearl acquired manufacturing equipment by trading in used manufacturing equipment. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of equipment traded in $43,680 Accumulated depreciation on equipment traded in - to date of sale 28,560 Fair value of equipment traded 21,000 Cash received 2,100 Fair value of equipment acquired 18,900 Asset 3: Four computers were acquired by issuing 500 shares of $1 par value common stock. The stock had a market price of $13 per share. Asset 3: Four computers were acquired by issuing 500 shares of $1 par value common stock. The stock had a market price of $13 per share. Assets 4 and 5: Pearl purchased these assets together for a lump sum of $193,200 cash. The following information was gathered. Initial Cost on Seller's Books Depreciation to Date on Seller's Books Book Value on Seller's Books Description Appraised Value Forklifts $63,000 $16,800 $46,200 $42,000 Equipment 151,200 33,600 117,600 138,600 Trucks 54,600 12,600 42,000 29,400 Record the acquisition of each of these assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Record the acquisition of each of these assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit Acquisition of Asset 1 Acquisition of Asset 2 Acquisition of Asset 3 Acquisition of Assets 4 and 5
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