Question

In: Accounting

Blossom Industries Corp. purchased the following assets and also constructed a building. All this was done...

Blossom Industries Corp. purchased the following assets and also constructed a building. All this was done during the current year.

Assets 1 and 2

These assets were purchased together for $124,000 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
Machinery $111,000 $53,000 $58,000 $90,000
Office Equipment 62,000 10,000 52,000 30,000


Asset 3

This machine was acquired by making a $10,200 down payment and issuing a $39,000, two-year, zero-interest-bearing note. The note is to be paid off in two $19,500 instalments made at the end of the first and second years. It was determined that the asset could have been purchased outright for $34,200.

Asset 4

A truck was acquired by trading in an older truck that has the same value in use. The newer truck has options that will make it more comfortable for the driver; however, the company remains in the same economic position after the exchange as before. Facts concerning the trade-in are as follows:

Cost of truck traded $108,000
Accumulated depreciation to date of sale 38,000
Fair market value of truck traded 87,000
Cash paid by Blossom 9,200
Fair market value of truck acquired 70,000


Asset 5

Office equipment was acquired by issuing 160 common shares. The shares are actively traded and had a closing market price a few days before the office equipment was acquired of $10 per share. Alternatively, the office equipment could have been purchased for a cash price of $1,575.

Construction of Building

A building was constructed on land that was purchased on January 1 at a cost of $146,000. Construction began on February 1 and was completed November 1. The payments to the contractor were as follows:

Date Payment
Feb. 1 $120,000
June 1 353,000
Sept. 1 476,000
Nov. 1 105,000


To finance construction of the building, a $617,000, 13% construction loan was taken out on February 1. At the beginning of the project, Blossom invested the portion of the construction loan that was not yet expended and earned investment income of $4,600. The loan was repaid on November 1 when the construction was completed. The firm had $204,000 of other outstanding debt during the year at a borrowing rate of 10% and a $202,000 loan payable outstanding at a borrowing rate of 6%.

(a)

Blossom uses a variety of alternatives to finance its acquisitions. Record the acquisition of each of these assets, assuming that Blossom prepares financial statements in accordance with IFRS. Use the net amount to record the note. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round capitalization rate to 2 decimal places, e.g. 52.75% and final answers to 0 decimal places, e.g. 5,275.)

Account Titles and Explanation

Debit

Credit

Acquisition of Assets 1 and 2

__________________

__________________

___________________

Acquisition of Asset 3

____________________

_____________________

____________________

Acquisition of Asset 4

___________________

____________________

_____________________

____________________

Acquisition of Asset 5

____________________

_____________________

Construction of Building

____________________

____________________

_____________________

_____________________

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