Acquisition of Trucks Acc 550 E 10-3

Name
Section
Date

Exercise 10-3
(Acquisition Costs of Trucks)
(Acquisition Costs of Trucks)

Shabbona Corporation

E10-3 (Acquisition Costs of Trucks) Shabbona Corporation operates a retail computer store. To
improve delivery services to customers, the beau monde purchases four new trucks on April 1,
2012. The terms of acquisition for severally truck argon described below.
1-Truck #1 has a slant worth of $15,000 and is acquired for a interchange payment of
$13,900
2-Truck #2 has a list price of $20,000 and is acquired for a down payment of $2,000 cash and a zerointerest-bearing pecker with a face amount of $18,000. The note is due April 1, 2013. Shabbona 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%. **
Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Shabbona
carries in muniment. The computer system make up $12,000 and is normally sold by Shabbona for
$15,200. Shabbona uses a perpetual inventory system.
4. Truck #4 has a list price of $14,000. It is acquired in exchange for 1,000 shares of common stock
in Shabbona Corporation. The stock has a tally value per share of $10 and a market price of $13 per
share

Shabbona Account Titles
1.

2.

Debit

Truck # 1
Cash
Truck #2
Discount on Notes Payable

$

Credit

13,900.



00
$

$
$

**

$
$

13,900.00

2,000.00
18,000.00

18,364.00
1,636.00

Cash
Notes Payable
PV of $18000 @ 10% for 1 year
(PV of Single sum 10%, 1 year $14,000) =
$18,000*.90909= $16363.62 rnd $16,364
16,634 + $2,000= $18,364 **
3.

4.

*

Truck # 3
COGS
Inventory
Sales

$
$

15,200.00
12,000.00

*
$
$

Truck #4
$ 13,000.00
Common Stock
Paid in Capital in Excess of equation
(1000 shares * $13 = $13,000 ; $13000 less $10,000 par val =$3,000)
fair price; retail price for puter x chnge
vehicles are never sold at list price >8B peeps forever ask for better price

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