Question

Grouper Industries purchased the following and constructed a building as well. All this was done during the current year Assets 1 and 2: These assets were purchased as a mesum for $190,000 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 $190.000 395.000 $95.000 114.000 19.000 95,000 57.000 Event Asset 3: This machine was acquired by making a $19,000 down payment and issuing a $570002-year ro interest bearing note. The note is to be paid off in two $28,500 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $68,210 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received Fair value of machinery acquired $190.000 76,000 152,000 19.000 133.000 Asset Si Equipment was acquired by issuing 100 shares of Sis par value common stock. The stock had a market price of $21 per share Construction of Building: A building was constructed on and purchased last year at a cost of $285.000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows Date Payment $225,000 654.000 912 000 190.000 9/ 11/1 To finance construction of the building a $1,140,000, 12 during the year ata borrowing rate of construction on was taken out on February 1. The loan was read on November 1. The firm had $380,000 of other outstanding deb Record the action of each of these assets. (Round intermediate calculations to 5 decimal places, 9.1.25124 and final answer to decimal places eg. 58,971 Credit account ities are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the accountries and enter for the amount.)

Answer 1

Answer:-

Acquisition of asset 1 & 2: Account Titles Debit Credit Machinery ($190,000 > 171,000 / 228,000) $ 142,500 Equipment ($190,000 57,000/ 228,000) 47,500 Cash $ 190,000 Note: Appraised value has been used to break lump-sum purchase.

Credit $ Acquisition of asset 3: Account Titles Machinery Discount on notes payable Cash Notes payable Debit 68,210 7,790 $ 19,000 57,000

Credit $ Acquisition of asset 4: Account Titles Machinery Accumulated depreciation Cash Machinery Gain on disposal of machinery Debit 99,750 76,000 19,000 190,000 4,750

Explanation:

$ Cost of machinery Less: Acc dep. Book value Fair value of machinery traded Gain Recognized gain (38,000 19,000 / 152,000) Unrecognised gain (38,000 - 4,750) 190,000 76,000 114,000 152,000 38,000 4,750 33,250 This unrecognized gain is used to reduce the basis of asset acquired Value of machinery recorded (133,000 - 33,250) $ 99,750

| Credit Acquisition of asset 5: Account Titles Equipment Common stock Paid-in capital in excess of par $ Debit 2,100 $ 1,500 600