Exercise 10-3 (Acquisition Costs of Trucks)

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