Connors Corporation acquired manufacturing equipment for use in its assembly lin

Question

Connors Corporation acquired manufacturing equipment for use in its assembly line. Below are four independent situations relating to the acquisition of the equipment. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)
A.
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.
B.
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.
C.
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.
D.
Connors issued 1,000 shares of its nopar 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.

Required:
For each of the above situations, prepare the journal entry required to record the acquisition of the equipment. (If no entry is required for a transaction, select "No journal entry required" in the first account field.) (Show your work)

Explanation / Answer

Journal Entries Particulars Debit $ Credit $ A. Equipment     24,500.00 Accounts Payable      24,500.00 B. Equipment     24,545.00 Discount on Notes Payable        2,455.00 Note Payable      27,000.00 C. Equipment New     24,500.00 Accumulated Depreciation        8,000.00 Loss on Equipment        3,500.00 Cash      22,000.00 Equipment Old      14,000.00 D. Equipment     24,000.00 Common Stock      24,000.00

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