Sign in
Get StudyX it's free
Sign in
Open in AppQUESTION
Text
Image
Explaining the Nature of a Long-Lived Asset and Determining and Recording the Financial Statement Effects of Its Purchase (AP81)
On January 2, Summers Company received a machine that the company had ordered with an invoice price of $\$ 85,000$ . Freight costs of $\$ 1,000$ were paid by the vendor per the sales agreement. The company exchanged the following on January 2 to acquire the machine:
Issued 2,000 shares of Summers Company common stock, par value \$ 1 (market value, \$3.50 per share).
Signed a note payable for $\$ 60,000$ with an 11.5 percent interest rate, (principal plus interest are due April 1 of the current year).
The balance of the invoice price was on account with the vendor, to be paid in cash by January 12 .
On January 3, Summers Company paid $\$ 2,400$ cash for installation costs to prepare the machine for use.
On January 12, Summers Company paid the balance due on its accounts payable to the vendor.>Required:
1. What are the classifications of long-lived assets? Explain their differences.
2. Record the purchase on January 2, the installation costs on January 3, and the subsequent payment on January 12. Show computations.
3. Indicate the accounts, amounts, and effects (+ for increase and - for decrease) of the purchase and subsequent cash payment on the accounting equation. Use the following structure:
Date $\quad$ Assets =$\quad$ Liabilities + Stockholders&qpos; Equity
4. What is the cost of the machine recorded on Summers&qpos;s records? Explain the basis you used for any questionable items.
Explaining the Nature of a Long-Lived Asset and Determining and Recording the Financial Statement Effects of Its Purchase (AP81) On January 2, Summers Company received a machine that the company had ordered with an invoice price of $\$ 85,000$. Freight costs of $\$ 1,000$ were paid by the vendor per the sales agreement. The company exchanged the following on January 2 to acquire the machine: Issued 2,000 shares of Summers Company common stock, par value $\$ 1$ (market value, \$3.50 per share). Signed a note payable for $\$ 60,000$ with an 11.5 percent interest rate (principal plus interest are due April 1 of the current year). The balance of the invoice price was on account with the vendor, to be paid in cash by January 12. On January 3, Summers Company paid $\$ 2,400$ cash for installation costs to prepare the machine for use. On January 12, Summers Company paid the balance due on its accounts payable to the vendor.
Required: 1. What are the classifications of long-lived assets? Explain their differences. 2. Record the purchase on January 2, the installation costs on January 3, and the subsequent payment on January 12. Show computations. 3. Indicate the accounts, amounts, and effects (+ for increase and - for decrease) of the purchase and subsequent cash payment on the accounting equation. Use the following structure: Date Assets $=\quad$ Liabilities $+\quad$ Stockholders' Equity 4. What is the cost of the machine recorded on Summers's records? Explain the basis you used for any questionable items.
On January 2, Summers Company received a machine that the company had ordered with an invoice price of $\$ 85,000$ . Freight costs of $\$ 1,000$ were paid by the vendor per the sales agreement. The company exchanged the following on January 2 to acquire the machine:
Issued 2,000 shares of Summers Company common stock, par value \$ 1 (market value, \$3.50 per share).
Signed a note payable for $\$ 60,000$ with an 11.5 percent interest rate, (principal plus interest are due April 1 of the current year).
The balance of the invoice price was on account with the vendor, to be paid in cash by January 12 .
On January 3, Summers Company paid $\$ 2,400$ cash for installation costs to prepare the machine for use.
On January 12, Summers Company paid the balance due on its accounts payable to the vendor.>Required:
1. What are the classifications of long-lived assets? Explain their differences.
2. Record the purchase on January 2, the installation costs on January 3, and the subsequent payment on January 12. Show computations.
3. Indicate the accounts, amounts, and effects (+ for increase and - for decrease) of the purchase and subsequent cash payment on the accounting equation. Use the following structure:
Date $\quad$ Assets =$\quad$ Liabilities + Stockholders&qpos; Equity
4. What is the cost of the machine recorded on Summers&qpos;s records? Explain the basis you used for any questionable items.
Explaining the Nature of a Long-Lived Asset and Determining and Recording the Financial Statement Effects of Its Purchase (AP81) On January 2, Summers Company received a machine that the company had ordered with an invoice price of $\$ 85,000$. Freight costs of $\$ 1,000$ were paid by the vendor per the sales agreement. The company exchanged the following on January 2 to acquire the machine: Issued 2,000 shares of Summers Company common stock, par value $\$ 1$ (market value, \$3.50 per share). Signed a note payable for $\$ 60,000$ with an 11.5 percent interest rate (principal plus interest are due April 1 of the current year). The balance of the invoice price was on account with the vendor, to be paid in cash by January 12. On January 3, Summers Company paid $\$ 2,400$ cash for installation costs to prepare the machine for use. On January 12, Summers Company paid the balance due on its accounts payable to the vendor.
Required: 1. What are the classifications of long-lived assets? Explain their differences. 2. Record the purchase on January 2, the installation costs on January 3, and the subsequent payment on January 12. Show computations. 3. Indicate the accounts, amounts, and effects (+ for increase and - for decrease) of the purchase and subsequent cash payment on the accounting equation. Use the following structure: Date Assets $=\quad$ Liabilities $+\quad$ Stockholders' Equity 4. What is the cost of the machine recorded on Summers's records? Explain the basis you used for any questionable items.
Public Answer
KKUZKL The First Answerer
