One of the Most Critical Steps in Recording the Acquisition

question 16

Essay

One of the most critical steps in recording the acquisition of assets is the determination of the cost assigned to the asset.Data related to assets acquired by Mindset Manufacturing Company are as follows:
(1)Machine A was purchased at a list price of $102,000; terms 2/10,net 30.The machine invoice was paid after the discount period.Transportation charges were $1,270; installation costs were $920; and the cost of a trial run was $960.Normal repairs and maintenance for the first year were $410.
(2)Machine B could be purchased for five annual payments of $6,332 or $29,400 in cash.Mindset elected to purchase Machine B under the installment plan.Other related acquisition costs totaled $175.
(3)On May 12,2014,Alberta Company offered to sell land to Mindset for $62,000; the offer was rejected.On June 29,2,125 shares of Mindset common stock were issued in exchange for the land.The par value of the stock was $20 per share; the market value of the stock was $32 per share at the time of purchase.Mindset's management was confident the land would be worth at least $64,000 to the company.
(4)The company purchased equipment under a deferred payment contract-- $40,000 down payment and 30 semiannual payments of $5,000.(Assume a 12 percent interest rate.)Determine the acquisition cost for each of the assets.

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Definitions:

Locus of Control

A psychological concept referring to an individual's belief about the extent to which their actions influence outcomes.

Social-Learning Approach

A theory that suggests individuals learn social behavior (e.g., aggression) through observation, imitation, and modeling, involving processes like reinforcement and punishment.

Ohio State University

A public research university located in Columbus, Ohio, known for its significant contributions to various fields of study, including psychology.

Julian Rotter

An American psychologist best known for his development of social learning theory and the concept of locus of control.