Ө E10.16 (LO 2, 3) Groupwork (Asset Acquisition) Hayes Industries 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 $100,000 cash. The following information was gathered. Description Initial Cost on Seller's Books Machinery Equipment $100,000 60,000 Depreciation to Date on Seller's Books $50,000 10,000 Book Value on Seller's Books Appraised Value $50,000 50,000 $90,000 30,000 Asset 3: This machine was acquired by making a $10,000 down payment and issuing a $30,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $15,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $35,900. 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received Fair value of machinery acquired $100,000 40,000 80,000 10,000 70,000 Asset 5: Equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market price of $11 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $120,000 6/1 360,000 9/1 480,000 11/1 100,000 To finance construction of the building, a $600,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%. Instructions Record the acquisition of each of these assets.
Ө E10.16 (LO 2, 3) Groupwork (Asset Acquisition) Hayes Industries 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 $100,000 cash. The following information was gathered. Description Initial Cost on Seller's Books Machinery Equipment $100,000 60,000 Depreciation to Date on Seller's Books $50,000 10,000 Book Value on Seller's Books Appraised Value $50,000 50,000 $90,000 30,000 Asset 3: This machine was acquired by making a $10,000 down payment and issuing a $30,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $15,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $35,900. 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received Fair value of machinery acquired $100,000 40,000 80,000 10,000 70,000 Asset 5: Equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market price of $11 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $120,000 6/1 360,000 9/1 480,000 11/1 100,000 To finance construction of the building, a $600,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 8%. Instructions Record the acquisition of each of these assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Ө
E10.16 (LO 2, 3) Groupwork (Asset Acquisition) Hayes Industries 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 $100,000 cash. The following information
was gathered.
Description
Initial Cost on
Seller's Books
Machinery
Equipment
$100,000
60,000
Depreciation to
Date on Seller's
Books
$50,000
10,000
Book Value on
Seller's Books
Appraised Value
$50,000
50,000
$90,000
30,000
Asset 3: This machine was acquired by making a $10,000 down payment and issuing a $30,000,
2-year, zero-interest-bearing note. The note is to be paid off in two $15,000 installments made at the
end of the first and second years. It was estimated that the asset could have been purchased outright
for $35,900.
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
Accumulated depreciation to date of sale
Fair value of machinery traded
Cash received
Fair value of machinery acquired
$100,000
40,000
80,000
10,000
70,000
Asset 5: Equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a
market price of $11 per share.
Construction of Building: A building was constructed on land purchased last year at a cost of $150,000.
Construction began on February 1 and was completed on November 1. The payments to the contractor
were as follows.
Date
Payment
2/1
$120,000
6/1
360,000
9/1
480,000
11/1
100,000
To finance construction of the building, a $600,000, 12% construction loan was taken out on
February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during
the year at a borrowing rate of 8%.
Instructions
Record the acquisition of each of these assets.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education