E10-3 Acquisition Costs The Voiture Company manufacturescompact, energy-efficien
ID: 2433977 • Letter: E
Question
E10-3 Acquisition Costs The Voiture Company manufacturescompact, energy-efficient cars.
On April 1, is purchased a machine for its assembly line at acontract price of $200,000 with terms of 2/10, n/30.The companypaid the contract price on April 8 and also incurred installationand transportation costs of $5,000, sales tax of $10,000, andtesting costs of $2,000. During testing, the machine wasaccidentally damaged, so the company had to pay $1,000 to repairit.
Prepare the journal entry to record the acquisition of themachine.
E10-5 Determination of Acquisition Cost on August 2, 2010.Darmow Corporation purchased a new machine on a differed paymentbasis. It made a down payment of $1,000 and will make four monthlyinstallments of $2,500 each beginning on September 1, 2010. Thecash equivalent price of the machine was $9,500. Darmow incurredand paid installment cost amounting to $300.
Prepare the journal entry to record the acquisition of themachine.
E10-7 Lump-Sum Purchase The Garrett Corporation paid $200,000 toacquire land, buildings, and equipment. At the time of acquisitionthe company paid $20,000 for an appraisal, which revealed thefollowing values: land, $100,000; building, $125,000; andequipment, $25,000.
What cost does the company assign to the land, buildings, andequipment, respectively?
P10-7 Assets Acquired by Exchange The Bremer Company made thefollowing exchanges of assets during 2010:
1. Acquired a more advancedmachine worth $10,000 by paying $2,000 cash and giving up a machinethat had originally cost $40,000 and has a book value of$12,000
2. Acquired a building worth$55,000 by paying $5,000 cash and giving up a piece of land thathad originally cost $35, 000,
3. Acquired a more advancedmachine worth $20,000 by paying $5,000 cash and giving up a machinethat had originally cost $13,000 and has a book value of$11,000
4. Acquired a car by giving atruck that had originally cost $20,000, has a book value of$15,000, and has a “blue book” value of $16,800. Inaddition the company received $1,000 cash.
Prepare the journal entry of the Bremer Company for eachexchange.
Explanation / Answer
x.Hsp; Machine 200,000 Account Payable 200,000 Apr 8 Account Payable 200,000 Cash 196,000 Machine 4,000 Machine 18,000 Cash 18,000 (To record the transportation cost, sales tax, testing cost and the repair during installation) August 2 Machine 9,800 Interest Expense 1,500 Account Payable 10,000 Cash 1,300 Machine cost = 9,500 + 300 Account Payable = 4* 2,500 Interest Expense = 1,000+10,000 - 9,500 = 1,500 E 10-7 Total Value = 100,000 + 125,000 + 25,000 = 250,000 Land(220,000 * 100,000/250,000) 88,000 Building(220,000 * 125,000/250,000) 110,000 Equipment(220,000 * 25,000/250,000) 22,000 Cash 220,000 P10-7 1.Machine 10,000 Accumulated Depreciation (40,000-12,000) 28,000 Loss on disposal 4,000 Cash 2,000 Machine 40,000 2.Building 55,000 Gain ondisposal 8,000 Cash 5,000 Land 35,000 3.Machine &n
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