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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
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.
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