Question

I need help with the numbers for the blue boxes. Thank you !!

Sunland 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 $280,000 cash. The following information was gathered. Initial Cost on Description Seller's Books Machinery $280,000 $280,000 Equipment 168,000 Depreciation to Date on Seller's Books $140,000 28,000 Book Value on Seller's Books Appraised Value $140,000 $252,000 140,000 84,000 Asset 3: This machine was acquired by making a $28,000 down payment and issuing a $84,000, 2-year, zero-interest-bearing note. The note is to be paid off in two $42,000 installments made at the end of the first and second years. It was estimated that the asset could have been purchased outright for $100,520. 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 Accumulated depreciation to date of sale Fair value of machinery traded Cash received Fair value of machinery acquired $280,000 112,000 224,000 28,000 196,000 Asset 5: Equipment was acquired by issuing 100 shares of $22 par value common stock. The stock had a market price of $31 per share. Construction of Building: A building was constructed on land purchased last year at a cost of $420,000. Construction began on February 1 and was completed on November 1. The payments to the contractor were as follows. Date 2/1 6/1 9/1 11/1 Payment $336,000 1,008,000 1,344,000 280,000 To finance construction of the building, a $1,680,000, 12% construction loan was taken out on February 1. The loan was repaid on November 1. The firm had $560,000 of other outstanding debt during the year at a borrowing rate of 8%. Record the acquisition of each of these assets. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places e.g. 58,971. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)

Answer 1

Acquisition of Asset 4

Account titles and explanation	Debit	Credit
Cash	28000
Machinery (balancing figure)	147000
Accumulated depreciation – Machinery	112000
Machinery		280000
Gain on disposal of Machinery		7000

Acquisition of Asset 5

Account titles and explanation	Debit	Credit
Land	420000
Buildings	3113320
Cash		3388000
Interest expense		145320

NOTES:

Gain recognized = (28000/224000)*(224000-(280000-112000)) = 7000

Construction of Building Schedule of Weighted-Average Accumulated Expenditures
Date	amount	Current year capitalization period	Weighted-Average Accumulated Expenditures
February 1	420000	9/12	315000
February 1	336000	9/12	252000
June 1	1008000	5/12	420000
September 1	1344000	2/12	224000
November 1	280000	0/12	0
	3388000		$1211000

Avoidable interest = Weighted-Average Accumulated Expenditures * interest rate = 1211000*12% = $145320