Riverbed Company, a manufacturer of ballet shoes, is experiencing a period of sustained growth. In an effort to expand its production capacity to meet the increased demand for its product, the company recently made several acquisitions of plant and equipment. Rob Joffrey, newly hired in the position of fixed-asset accountant, requested that Danny Nolte, Riverbed's controller, review the following transactions.
Transaction 1: On June 1, 2017, Riverbed Company purchased equipment from Wyandot Corporation. Riverbed issued a $30,800, 4-year, zero-interest-bearing note to Wyandot for the new equipment. Riverbed will pay off the note in four equal installments due at the end of each of the next 4 years. At the date of the transaction, the prevailing market rate of interest for obligations of this nature was 9%. Freight costs of $417 and installation costs of $460 were incurred in completing this transaction. The appropriate factors for the time value of money at a 9% rate of interest are given below.
Future value of $1 for 4 periods 1.41
Future value of an ordinary annuity for 4 periods 4.57
Present value of $1 for 4 periods 0.71
Present value of an ordinary annuity for 4 periods 3.24
Transaction 2: On December 1, 2017, Riverbed Company purchased several assets of Yakima Shoes Inc., a small shoe manufacturer whose owner was retiring. The purchase amounted to $216,000 and included the assets listed below. Riverbed Company engaged the services of Tennyson Appraisal Inc., an independent appraiser, to determine the fair values of the assets which are also presented below.
Yakima Book Value
During its fiscal year ended May 31, 2018, Riverbed incurred $7,230 for interest expense in connection with the financing of these assets.
Transaction 3: On March 1, 2018, Riverbed Company exchanged a number of used trucks plus cash for vacant land adjacent to its plant site. (The exchange has commercial substance.) Riverbed intends to use the land for a parking lot.
The trucks had a combined book value of $32,390, as Riverbed had recorded $19,130 of accumulated depreciation against these assets. Riverbed's purchasing agent, who has had previous dealings in the secondhand market, indicated that the trucks had a fair value of $42,140 at the time of the transaction. In addition to the trucks, Riverbed Company paid $19,720 cash for the land.
(b) For each of the three transactions described above, determine the value at which Riverbed Company should record the acquired assets. (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places e.g. 58,971.)
Recently Asked Questions
- Which nursing interventions are appropriate for the NANDA-I nursing diagnosis Ineffective Airway Clearance for the patient with pneumonia? Select all that
- Alpha Company provided the following data concerning its income statement: sales, $990,000; purchases, $434,000; beginning inventory, $245,000; ending
- The existing collective bargaining agreement between a major aerospace manufacturer and the union representing its aircraft electricians is expiring in three