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Logan 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 $104,000 cash. The following information was gathered:
Description initial cost on depreciation to book value on Appraised value
sellers book date on sellers sellers books
Machinery $100,000 $50,000 $50,000 $90,000
Office equipment 60000 10000 50000 30000
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.
This machinery was acquired by trading in used machinery. (This exchange lacks commercial substance.) Facts concerning the trade-in are as follows:
Cost of machinery traded: $100,000
Accumulated depreciation to date of sale: $36,000
Fair value of machinery traded: $80,000
Cash received: $10,000
Fair value of machinery acquired: $70,000
Office equipment was acquired by issuing 100 shares of $8 par value common stock. The stock had a market value of $11 per share.
Construction of Building
A building was constructed on land purchased last year at a cost of $180,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows:
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%.
Record the acquisition of each of these assets.