Question 1: Yukio Mishima Industries acquired equipment this year to be used in its operations. The equipment was delivered by the suppliers, installed by Mishima, and placed into operation. Some of it was purchased for cash with discounts available for prompt payment. Some of it was purchased under long-term payment plans for which the interest charges approximated prevailing rates. What costs should Mishima capitalize for the new equipment purchased this year? Explain.
Question 2: Adam Mickiewicz Co. purchased for $2,200,000 property that included both land and a building to be used in operations. The seller's book value was $300,000 for the land and $900,000 for the building. By appraisal, the fair market value was estimated to be $500,000 for the land and $2,000,000 for the building. At what amount should Mickiewicz report the land and the building at the end of the year?
Question 3: Richardson Co. acquires machinery by paying $10,000 cash and signing a $5,000, 2-year, zero-interest-bearing note payable. The note has a present value of $4,058, and Richardson purchased a similar machine last month for $13,500. At what cost should the new equipment be recorded?
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