Question4

SweetIndustries purchased the following assets and constructed a building as well. All this was done during the current year.

Assets 1 and 2:These assets were purchased as a lump sum for $230,000cash. 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

$230,000

$115,000

$115,000

$207,000

Equipment

138,000

23,000

115,000

69,000

Asset 3:This machine was acquired by making a $23,000down payment and issuing a $69,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $34,500installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $82,570.

Asset 4:This machinery was acquired by trading in used machinery. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows.

Cost of machinery traded

$230,000

Accumulated depreciation to date of sale

92,000

Fair value of machinery traded

184,000

Cash received

23,000

Fair value of machinery acquired

161,000

Asset 5:Equipment was acquired by issuing100shares of $18par value common stock. The stock had a market price of $25per share.

Construction of Building:A building was constructed on land purchased last year at a cost of $345,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows.

Date

Payment

2/1

$276,000

6/1

828,000

9/1

1,104,000

11/1

230,000

To finance construction of the building, a $1,380,000,12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $460,000of other outstanding debt during the year at a borrowing rate of8%.

Record the acquisition of each of these assets.(Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation

Debit

Credit

Acquisition of Assets 1 and 2

Acquisition of Asset 3

Acquisition of Asset 4

Acquisition of Asset 5

(To record acquisition of Office Equipment)