Nash 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 $ 320,000 cash. The following information was gathered. Initial Cost on Depreciation to Book Value on Description Seller's Books Date on Seller's Books Seller's Books Appraised Value Machinery $320,000 $ 160,000 $ 160,000 $ 288,000 Equipment 192,000 32,000 160,000 96,000 Asset 3: This machine was acquired by making a $ 32,000 down payment and issuing a$ 96,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $ 48,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $ 114,880. 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 $320,000 Accumulated depreciation to date of sale 128,000 Fair value of machinery traded 256,000 Cash received 32,000 Fair value of machinery acquired 224,000 Asset 5: Equipment was acquired by issuing 100 shares of $ 26 par value common stock. The stock had a market price of $ 35 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $ 480,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $ 384,000 6/1 1,152,000 9/1 1,536,000 11/1 320,000 To finance
Nash 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 $ 320,000 cash. The following information was gathered. Initial Cost on Depreciation to Book Value on Description Seller's Books Date on Seller's Books Seller's Books Appraised Value Machinery $320,000 $ 160,000 $ 160,000 $ 288,000 Equipment 192,000 32,000 160,000 96,000 Asset 3: This machine was acquired by making a $ 32,000 down payment and issuing a$ 96,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $ 48,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $ 114,880. 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 $320,000 Accumulated depreciation to date of sale 128,000 Fair value of machinery traded 256,000 Cash received 32,000 Fair value of machinery acquired 224,000 Asset 5: Equipment was acquired by issuing 100 shares of $ 26 par value common stock. The stock had a market price of $ 35 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $ 480,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $ 384,000 6/1 1,152,000 9/1 1,536,000 11/1 320,000 To finance
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 21P
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Transcribed Image Text:To finance construction of the building, a $ 1,920,000, 12% construction loan was taken out on February 1. The loan was repaid on
November 1. The firm had $ 640,000 of other outstanding debt during the year at a borrowing rate of 8%.
Record the acquisition of each of these assets. (Round intermediate calculations to 5 decimal places, eg. 1.25124 and final answer to 0
decimal places eg. 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 O for the amounts.)
Account Titles and Explanation
Debit
Credit
Acquisition of Assets 1 and 2
Acquisition of Asset 3
Acquisition of Asset 4
Transcribed Image Text:Nash 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 $ 320,000 cash. The following information was gathered.
Depreciation to
Book Value on
Initial Cost on
Seller's Books
Description
Date on Seller's Books
Seller's Books
Appraised Value
Machinery
$320,000
$ 160,000
$ 160,000
%24
$ 288,000
Equipment
192,000
32,000
160,000
96,000
Asset 3: This machine was acquired by making a $ 32,000 down payment and issuing a$ 96,000, 2-year, zero-interest-bearing note.
The note is to be paid off in two $ 48,000 installments made at the end of the first and second years. It was estimated that the asset
could have been purchased outright for $ 114,880.
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
$320,000
Accumulated depreciation to date of sale
128,000
Fair value of machinery traded
256,000
Cash received
32,000
Fair value of machinery acquired
224,000
Asset 5: Equipment was acquired by issuing 100 shares of $26 par value common stock. The stock had a market price of $ 35 per
share.
Construction of Building: A building was constructed on land purchased last year at a cost of $ 480,000. Construction began on
February 1 and was completed on November 1. The payments to the contractor were as follows.
Date
Payment
2/1
$ 384,000
6/1
1,152,000
9/1
1,536,000
11/1
320,000
To finance construction of the building, a $ 1,920,000, 12% construction loan was taken out on February 1. The loan was repaid on
November 1 The firm had 0000of other outstanding deht durino thAvear ata borrowino.cate of 8%
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