1. The equipment was purchased on account for $32,000. Credit terms were 3/10, n/30. Payment was made within the discount period and the company records the purchases of equipment net of discounts.
2. Connors gave the seller a noninterest-bearing note. The note required payment of $34,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 12% properly reflects the time value of money in this situation.
3. Connors traded in old equipment that had a book value of $9,500 (original cost of $21,000 and accumulated depreciation of $11,500) and paid cash of $29,000. The old equipment had a fair value of $5,300 on the date of the exchange. The exchange has commercial substance.
4. Connors issued 1,000 shares of its no-par common stock in exchange for the equipment. The market value of the common stock was not determinable. The equipment could have been purchased for $31,000 in cash.