Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. The equipment was purchased on account for $43,000 Credit terms were 310/, n30/.
Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. The equipment was purchased on account for $43,000 Credit terms were 310/, n30/.
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter2: Asset And Liability Valuation And Income Recognition
Section: Chapter Questions
Problem 5QE
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Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. The equipment was purchased on account for $43,000 Credit terms were 310/, n30/. Payment was made within the discount period and the company records the purchases of equipment net of discounts. Connors gave the seller a noninterest-bearing note. The note required payment of $45,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 12% properly reflects the time value of money in this situation, Connors traded in old equipment that had a book value of $15,000 ( original cost of $32, 000 and accumulated depreciation of $17,000) and paid cash of 540,000. The old equipment had a fair value of $9, 700 on the date of the exchange. The exchange has commercial substance. Connors issued 2, 000 shares of its no-par common stock in exchange for the equipment. The market value of the common stock was not determinable. The equipment could have been purchased for $42, 000 in cash. Required: For each of the above situations, prepare the journal entry required to record the acquisition of the equipment
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