Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. What journal entry is required for each situation ?The equipment was purchased on account for $25,000. Credit terms were 2/10, n/30. 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 $27,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 10% properly reflects the time value of money in this situation.Connors traded in old equipment that had a book value of $6,000 (original cost of $14,000 and accumulated depreciation of $8,000) and paid cash of $22,000. The old equipment had a fair value of $2,500 on the date of the exchange. The exchange has commercial substance.Connors issued 1,000 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 $24,000 in cash.

Solution: Journal entry is an accounting entry to record every transaction takes place in an…

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Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter17: Advanced Issues In Revenue Recognition

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Problem 19E: Rix Company sells home appliances and provides installation and service for its customers. On April...

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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. What journal entry is required for each situation ?

The equipment was purchased on account for $25,000. Credit terms were 2/10, n/30. 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 $27,000 one year from date of purchase. The fair value of the equipment is not determinable. An interest rate of 10% properly reflects the time value of money in this situation.
Connors traded in old equipment that had a book value of $6,000 (original cost of $14,000 and accumulated depreciation of $8,000) and paid cash of $22,000. The old equipment had a fair value of $2,500 on the date of the exchange. The exchange has commercial substance.
Connors issued 1,000 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 $24,000 in cash.

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