Question

Molitor Corporation builds in-home theater systems. Molitor’s business is growing quickly. Therefore, the CEO, Paul Molitor, decides to purchase three new trucks on September 20, 2017. The terms of acquisition for each truck are described below.

1.		The first truck’s list price is $21,000. Molitor exchanges home theater equipment from its inventory for the truck. The home theater equipment cost Molitor $13,000. Molitor normally sells the equipment for $19,750. Molitor uses a perpetual inventory system.
2.		The second truck has a list price of $22,000. Molitor makes a down payment of $5,000 cash on this truck and signs a zero-interest-bearing note with a face amount of $17,000. Payment of the note is due September 20, 2018. Molitor would normally have to pay interest at a rate of 8% for such a borrowing.
3.		The list price of the third truck is $19,200. This truck is acquired in exchange for 1,200 shares of common stock in Molitor Corporation. The stock has a par value per share of $12 and a market price of $15 per share.

Prepare the appropriate journal entries for the above transactions for Molitor Corporation.

Question 12 Molitor Corporation builds in-home theater systems. Molitor's business is growing quickly. Therefore, the CEO, Paul Molitor, decides to purchase three new trucks on September 20, 2017. The terms of acquisition for each truck are described below. 1. The first truck's list price is $21,000. Molitor exchanges home theater equipment from its inventory for the truck. The home theater equipment cost Molitor $13,000. Molitor normally sells the equipment for $19,750. Molitor uses a perpetual inventory system. The second truck has a list price of $22,000. Molitor makes a down payment of $5,000 cash on this truck and signs a zero-interest-bearing note with a face amount of $17,000. Payment of the note is due September 20, 2018. Molitor would normally have to pay interest at a rate of 8% for such a borrowing. The list price of the third truck is $19,200. This truck is acquired in exchange for 1,200 shares of common stock in Molitor Corporation. The stock has a par value per share of $12 and a market price of $15 per share. 3. Prepare the appropriate journal entries for the above transactions for Molitor Corporation. (Round present value factors to 5 decimal places, e.g. 0.52587 and final answers to 2 decimal places, e.g. 5,275.50. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit

Answer 1

Truck	Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
1	20-Sep-17	Truck A/c	Dr	19,750.00
		To Sales A/c	Cr		19,750.00
		(Being purchase of truck recorded at Fair value of inventory given)
Truck	Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
2	20-Sep-17	Truck A/c	Dr	20,740.74
		To Cash A/c	Cr		5,000.00
		To Note Payable	Cr		15,740.74
		(Being purchase of truck recorded and cash paid along with note signed - Refer Working Note 1)
Truck	Date	Particulars	Dr/Cr.	Dr ($)	Cr ($)
3	20-Sep-17	Truck A/c	Dr	18,000.00
		To Equity Share Capital A/c	Cr		14,400.00
		To Securities Premium A/c	Cr		3,600.00
		(Being Truck purchased in exhange of share capital at fair value - Refer Working Note 2)
		Working Note
	1	Present Value of Note
		Value of Note signed	17,000.00
		Interest rate	8%
		Present Value of Note = Value of Note/ (1+0.08)	15,740.74
	2	Fair value of 1200 shares @ $15/ share	18,000.00
		Less: Equity Share Capital @ $12/ share	14,400.00
		Securities Premium	3,600.00