Connors Corporation acquired manufacturing equipment for use in its assembly lin
ID: 2520152 • Letter: C
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.)
The equipment was purchased on account for $26,000. Credit terms were 3/10, 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 $28,000 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 $6,500 (original cost of $15,000 and accumulated depreciation of $8,500) and paid cash of $23,000. The old equipment had a fair value of $2,900 on the date of the exchange. The exchange has commercial substance.
Connors issued 2,000 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 $28,000 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/event, select "No journal entry required" in the first account field. Round your answers to the nearest whole dollar amount.)
Record the purchase of equipment on account.
Record the acquisition of equipment in exchange for a note.
Record the exchange of old equipment for new equipment.
Record the acquisition of equipment by the issuance of stock.
Event General Journal Debit Credit 1Explanation / Answer
Explanation Debit Credit 1 Equipment 25220 Accounts payable 25220 26000*97% 2 Equipment 28000/112*100 25000 Discount on note payable 28000/112*12 3000 Note payable 28000 3 Equipment - new 25900 Loss 6500-2900 3600 Accumulated depriciation 8500 Cash 23000 Equipment - old 15000 4 Cash 28000 Common stock 28000
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