E10-3 (Acquisition Costs of Trucks) Kelly Clarkson Corporation operates a retail computer store. To improve delivery services to customers, the company purchases 4 new trucks on April 1, 2014. The terms of acquisition for each truck are described below.

1) Truck #1 has a list price of $15,000 and is acquired for a down payment of $13,900.

Trucks 13,900

Cash 13,900

2) Truck #2 has a list price of $16,000 and is acquired for a down payment of $2,000 cash and a zero-interest-bearing note with a face amount of $14,000. The note is due April 1, 2015. Clarkson would normally have to pay interest at a rate of 10% for such a borrowing, and the dealership has an incremental borrowing rate of 8%.

Trucks 14,727.26*

Discount on Notes Payable 1272.74

Cash 2,000

Notes Payable 14,000

*PV of $14,000 @ 10% for 1 year =

$14,000 x .90909 = $12,727.26

$12,727.26 + $2,000 = $14,727.26

3) Truck #3 has a list price $16,000. It is acquired in exchange for a computer system that Clarkson carries in inventory. The computer system costs $12,000 and is normally sold by Clarkson for $15,200. Clarkson uses a perpetual inventory system.

Trucks 15,200

Cost of Goods Sold 12,000

Inventory 12,000

Sales Revenue 15,200

4) Truck #4 has a list price of$14,000. It is acquired in exchange for 1,000 shares of common stock in Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share.

Trucks 13,000

Common Stock 10,000

Paid-In Capital in Excess of Par –

Common Stock 3,000

(1,000 shares x $13 = $13,000)

Instructions: Prepare the Journal Entries

	Created by luzser1800 over 8 years ago

Intermediate Accounting Note on Exercise 10-3 (Acquisition Costs of Trucks), created by luzser1800 on 14/02/2016.