Financial Accounting Acquisition Costs Homework Help
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Acquisition Costs of Trucks
Shabbona Corporation operates a retail computer store. To improve delivery services to customers, the company purchases four new trucks on April 1, 2012. The terms of acquisition for each truck are described below.
1. Truck #1 has a list price of $15,000 and is acquired for a cash payment of $13,900.
2. Truck #2 has a list price of $20,000 and is acquired for a down payment of $2,000 cash and a zerointerest- bearing note with a face amount of $18,000. The note is due April 1, 2013. Shabbona would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.
3. Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Shabbona carries in inventory. The computer system cost $12,000 and is normally sold by Shabbona for $15,200. Shabbona uses a perpetual inventory system.
4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock in Shabbona Corporation. The stock has a par value per share of $10 and a market price of $13 per share.
Prepare the appropriate journal entries for the foregoing transactions for Shabbona Corporation. (Round computations to the nearest dollar.)
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Purchase and Self-Constructed Cost of Assets
Dane Co. both purchases and constructs various equipment it uses in its operations. The following items for two different types of equipment were recorded in random order during the calendar year 2013.
|Cash paid for equipment, including sales tax of $5,000||$105,000|
|Freight and insurance cost while in transit||2,000|
|Cost of moving equipment into place at factory||3,100|
|Wage cost for technicians to test equipment||6,000|
|Insurance premium paid during first year of operation on this equipment||1,500|
|Special plumbing fixtures required for new equipment||8,000|
|Repair cost incurred in first year of operations related to this equipment||1,300|
|Material and purchased parts (gross cost $200,000; failed to take 1% cash discount)||$200,000|
|Imputed interest on funds used during construction (stock financing)||14,000|
|Allocated overhead costs (fixed—$20,000; variable—$30,000)||50,000|
|Profi t on self-construction||30,000|
|Cost of installing equipment||4,400|
Compute the total cost for each of these two pieces of equipment. If an item is not capitalized as a cost of the equipment, indicate how it should be reported.
Product Code: ACC297
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