Lola industries purchased the following assets and constructed a building as well. All of this was done during the current year.
Assets 1 and 2:
These assets were purchased as a lump sum for $110,000 cash. The following was gathered:
|
Description
|
Initial Cost on Seller's Books
|
Depreciation to Date on Seller's Books
|
Book Value on Seller's Books
|
Appraised Value
|
|
Machinery
|
$100,000
|
$40,000
|
$60,000
|
$81,000
|
|
Office Equipment
|
70,000
|
25,000
|
45,000
|
44,000
|
Asset 3
Office Equipment was acquired by issuing 300 shares of $6 par value common stock. The stock had a market value of $14 per share.
Construction of Building
A building was constructed on land purchased last year at a cost of $150,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows:
|
Date
|
Payment
|
|
2/1
|
$100,000
|
|
6/1
|
380,000
|
|
9/1
|
460,000
|
|
11/1
|
120,000
|
To finance construction of the building, a $600,000 10% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $200,000 of other outstanding debt during the year at a borrowing rate of 7%.
Required: Record all of the applicable acquisition/construction entries for each of these assets.