Nash Industries purchased the following assets and constructed a building as well. All this was done during the current year. Assets 1 and 2: These assets were purchased as a lump sum for $ 320,000 cash. The following information was gathered. Initial Cost on Depreciation to Book Value on Description Seller's Books Date on Seller's Books Seller's Books Appraised Value Machinery $320,000 $ 160,000 $ 160,000 $ 288,000 Equipment 192,000 32,000 160,000 96,000 Asset 3: This machine was acquired by making a $ 32,000 down payment and issuing a$ 96,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $ 48,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $ 114,880. Asset 4: This machinery was acquired by trading in used machinery. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of machinery traded $320,000 Accumulated depreciation to date of sale 128,000 Fair value of machinery traded 256,000 Cash received 32,000 Fair value of machinery acquired 224,000 Asset 5: Equipment was acquired by issuing 100 shares of $ 26 par value common stock. The stock had a market price of $ 35 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $ 480,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $ 384,000 6/1 1,152,000 9/1 1,536,000 11/1 320,000 To finance
Nash Industries purchased the following assets and constructed a building as well. All this was done during the current year. Assets 1 and 2: These assets were purchased as a lump sum for $ 320,000 cash. The following information was gathered. Initial Cost on Depreciation to Book Value on Description Seller's Books Date on Seller's Books Seller's Books Appraised Value Machinery $320,000 $ 160,000 $ 160,000 $ 288,000 Equipment 192,000 32,000 160,000 96,000 Asset 3: This machine was acquired by making a $ 32,000 down payment and issuing a$ 96,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $ 48,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $ 114,880. Asset 4: This machinery was acquired by trading in used machinery. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of machinery traded $320,000 Accumulated depreciation to date of sale 128,000 Fair value of machinery traded 256,000 Cash received 32,000 Fair value of machinery acquired 224,000 Asset 5: Equipment was acquired by issuing 100 shares of $ 26 par value common stock. The stock had a market price of $ 35 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $ 480,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment 2/1 $ 384,000 6/1 1,152,000 9/1 1,536,000 11/1 320,000 To finance
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 21P
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