Question

Martinez Corporation operates aretail 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. 1. 2 3 Truck #1 has a list price of $43,950 and is acquired for a cash payment of $40.727. Truck #2 has a list price of $46,880 and is acquired for a down payment of $5,860 cash and a zero-interest-bearing note with a face amount of $41,020. The note is due April 1,2021. Martinez 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% Truck #3 has a list price of $46,880. It is acquired in exchange for a computer system that Martinez carries in inventory. The computer system cost $35.160 and is normally sold by Martinez for $44.536. Martinez uses a perpetual inventory system Truck #4 has a list price of $41,020. It is acquired in exchange for 960 shares of common stock in Martinez Corporation The stock has a par value per share of $10 and a market price of $13 per share 4 Prepare the appropriate journal entries for the above transactions for Martinez Corporation. (Round present value factors to 5 decimal places, eg. 0.52587 and final answers to 2 decimal places, eg. 52.75. 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 for the amounts.) No. Account Titles and Explanation Debit Credit 1. 2. 3.

Answer 1

JOURNAL ENTRIES
Date	Particulars	Debit	Credit
1	Equipment- Truck	43950
	Cash		40727
	Discount received		3223
	(being equipment purchased for cash)
2	Equipment- Truck	46880
	Cash		5860
	Note payable		37291
	Interest on note payable		3729
	(Being equipment purchased and note payable
	recorded at present value)
3	Equipment- Truck	46880
	Computer equipment		44536
	Discount received		2344
	(Being truck purchased in exchange of computer)
4	Equipment- Truck	41020
	Common stock		9600
	Securities premium		31420
	(Being truck purcased in exchange of common stock)

Zero percent note payable but market rate is 10%
Note payable will be recorded at present value of 10%
Therefore= 41020/1.1= 37291
Computer is normally sold at $44536, hence it will be recorded at
its sale value and not at cost
Common stock is always recorded at par value
The difference goes In securities premium account