Question

blem I (Asset Acquisition) Hayes Industries purchased the following assets and constructed a building as well. All this was done during the current year. Instructions Record the acquisition of each of these assets. 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 Depreciation to Date on Book Value on Appraised Seller's Books Seller's Books Seller's Books Value Machinery $100,000 $50,000 $50,000 $90,000 Equipment 60,000 10,000 50,000 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.

Answer 1

Date Credit ($) No. 1 & 2 Journal Account Titles and Explanation Machinery Equipment Cash (To record the acquistion of asset for cash) Debit ($) 50,000 50,000 100,000 Explanation: These assets are bought at the written down value of the seller) 35,900 4,100 Machinery Discount on notes payable (40000-35900) Cash Notes payable (To record the purchase of machinery) 10,000 30,000 Explanation: The asset could be bought for 35,900 for cash. Due to notes payable, it is bought at higher rates. A zero interest bearing note is always issued at a discount because there will be no interest.