Lankford Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2020. The terms of acquisition for each truck are described below. Truck #1 has a list price of $37,500 and is acquired for a cash payment of $34,750. Truck #2 has a list price of $40,000 and is acquired for a down payment of $5,000 cash and a zero-interest-bearing note with a face amount of $35,000. The note is due April 1, 2021. Lankford would normally have to pay interest at a rate of 8% for such a borrowing, and the dealership has an incremental borrowing rate of 6%. Truck #3 has a list price of $40,000. It is acquired in exchange for a computer system that Lankford carries in inventory. The computer system cost $30,000 and is normally sold by Lankford for $38,000. Lankford uses a perpetual inventory system. T ruck #4 has a list price of $35,000. It is acquired in exchange for 1,000 shares of common stock in Lankford Corporation. Lankford’s stock is actively traded. The stock has a par value per share of $10 and a market value of $26 per share. Prepare the appropriate journal entries for the foregoing transactions for Lankford Corporation. (Round computations to the nearest dollar).
Lankford Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2020. The terms of acquisition for each truck are described below.
- Truck #1 has a list price of $37,500 and is acquired for a cash payment of $34,750.
- Truck #2 has a list price of $40,000 and is acquired for a down payment of $5,000 cash and a zero-interest-bearing note with a face amount of $35,000. The note is due April 1, 2021. Lankford would normally have to pay interest at a rate of 8% for such a borrowing, and the dealership has an incremental borrowing rate of 6%.
- Truck #3 has a list price of $40,000. It is acquired in exchange for a computer system that Lankford carries in inventory. The computer system cost $30,000 and is normally sold by Lankford for $38,000. Lankford uses a perpetual inventory system.
- T ruck #4 has a list price of $35,000. It is acquired in exchange for 1,000 shares of common stock in Lankford Corporation. Lankford’s stock is actively traded. The stock has a par value per share of $10 and a market value of $26 per share.
Prepare the appropriate
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Protex Inc. acquired land, buildings, and equipment from a bankrupt company, for a lump-sum price of $700,000. At the time of purchase,
the assets had the following book and appraisal values.
Book Values Appraisal Values
Land $200,000 $300,000
Buildings 450,000 250,000
Equipment 300,000 250,000
To be conservative, the company decided to take the lower of the two values for each asset acquired. The following entry was made.
Land 200,000
Buildings 250,000
Equipment 250,000
Cash 700,000
2. Apple Industries purchased store equipment by making a $10,000 cash down payment and signing a 2-year, $40,000, 8% note payable.
The purchase was recorded as follows.
Store Equipment 56,400
Cash 10,000
Note Payable 40,000
Interest Payable 6,400
3. Cherry Company purchased office equipment for $50,000, terms 1/10, n/30. Because the company intended to take the discount, it made
no entry until it paid for the acquisition. The entry was:
Office Equipment 50,000
Cash 49,500
Purchase Discounts 500
4. Bubble Inc. recently received at zero cost land from the Village of Wellington as an inducement to locate its business in the Village. The
appraised value of the land is $120,000. The company made no entry to record the land because it had no cost basis.
5. Gump Company built a factory for $750,000. It could have purchased the building for $900,000. The controller made the following entry.
Warehouse 900,000
Cash 750,000
Profit on Construction 150,000
Instructions
Prepare the entry that should have been made at the date of each acquisition.
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