Buffalo Industries Inc. constructed a building and acquired five assets during the current year. Construction of Building: A building was constructed on land purchased last year at a cost of $230,400. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment March 1 $345,600 July 1 264,000 October 1 312,000 Buffalo obtained a $672,000, 8% construction loan on March 1. Buffalo repaid the loan on October 1. Buffalo had $384,000 of other outstanding debt during the year at a borrowing rate of 9%. Asset 1: Buffalo acquired office furniture by making a $7,200 down payment and issuing a $9,600, 2-year, zero-interest-bearing note. The note is to be paid off in two $4,800 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $15,552. Asset 2: Buffalo acquired manufacturing equipment by trading in used manufacturing equipment. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of equipment traded in $49,920 Accumulated depreciation on equipment traded in - to date of sale 32,640 Fair value of equipment traded 24,000 Cash received 2,400 Fair value of equipment acquired 21,600 Asset 3: Four computers were acquired by issuing 500 shares of $1 par value common stock. The stock had a market price of $12 per share. Assets 4 and 5: Buffalo purchased these assets together for a lump sum of $220,800 cash. The following information was gathered. Description Initial Cost on Seller’s Books Depreciation to Date on Seller’s Books Book Value on Seller’s Books Appraised Value Forklifts $72,000 $19,200 $52,800 $48,000 Equipment 172,800 38,400 134,400 158,400 Trucks 62,400 14,400 48,000 33,600 Record the acquisition of each of these assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

Buffalo Industries Inc. constructed a building and acquired five assets during the current year. Construction of Building: A building was constructed on land purchased last year at a cost of $230,400. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date Payment March 1 $345,600 July 1 264,000 October 1 312,000 Buffalo obtained a $672,000, 8% construction loan on March 1. Buffalo repaid the loan on October 1. Buffalo had $384,000 of other outstanding debt during the year at a borrowing rate of 9%. Asset 1: Buffalo acquired office furniture by making a $7,200 down payment and issuing a $9,600, 2-year, zero-interest-bearing note. The note is to be paid off in two $4,800 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $15,552. Asset 2: Buffalo acquired manufacturing equipment by trading in used manufacturing equipment. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows. Cost of equipment traded in $49,920 Accumulated depreciation on equipment traded in - to date of sale 32,640 Fair value of equipment traded 24,000 Cash received 2,400 Fair value of equipment acquired 21,600 Asset 3: Four computers were acquired by issuing 500 shares of $1 par value common stock. The stock had a market price of $12 per share. Assets 4 and 5: Buffalo purchased these assets together for a lump sum of $220,800 cash. The following information was gathered. Description Initial Cost on Seller’s Books Depreciation to Date on Seller’s Books Book Value on Seller’s Books Appraised Value Forklifts $72,000 $19,200 $52,800 $48,000 Equipment 172,800 38,400 134,400 158,400 Trucks 62,400 14,400 48,000 33,600 Record the acquisition of each of these assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Buffalo Industries Inc. constructed a building and acquired five assets during the current year.

Construction of Building: A building was constructed on land purchased last year at a cost of $230,400. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows.

Date		Payment
March 1		$345,600
July 1		264,000
October 1		312,000

Buffalo obtained a $672,000, 8% construction loan on March 1. Buffalo repaid the loan on October 1. Buffalo had $384,000 of other outstanding debt during the year at a borrowing rate of 9%.

Asset 1: Buffalo acquired office furniture by making a $7,200 down payment and issuing a $9,600, 2-year, zero-interest-bearing note. The note is to be paid off in two $4,800 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $15,552.

Asset 2: Buffalo acquired manufacturing equipment by trading in used manufacturing equipment. (The exchange lacks commercial substance.) Facts concerning the trade-in are as follows.

Cost of equipment traded in		$49,920
Accumulated depreciation on equipment traded in - to date of sale		32,640
Fair value of equipment traded		24,000
Cash received		2,400
Fair value of equipment acquired		21,600

Asset 3: Four computers were acquired by issuing 500 shares of $1 par value common stock. The stock had a market price of $12 per share.

Assets 4 and 5: Buffalo purchased these assets together for a lump sum of $220,800 cash. The following information was gathered.

Description	Initial Cost on Seller’s Books	Depreciation to Date on Seller’s Books		Book Value on Seller’s Books	Appraised Value
Forklifts	$72,000		$19,200		$52,800	$48,000
Equipment	172,800		38,400		134,400	158,400
Trucks	62,400		14,400		48,000	33,600

Record the acquisition of each of these assets. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Acquisition of Asset 3
Acquisition of Assets 4 and 5

Account Titles and Explanation
Debit
Credit
Acquisition of Asset 1
Acquisition of Asset 2

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