On January 1, Year 1, Lamp Company acquires new equipment in exchange for a note.Lamp must pay a lump sum of $32,000 on December 31, Year 3.The equipment is being specifically manufactured for Lamp, so no market price exists for the equipment.On similar types of equipment purchases, Lamp has paid 15% interest.The equipment has a five-year life and the company uses straight-line depreciation with a 10% salvage value.
Required:
Prepare journal entries to record the following:
a. original acquisition of equipment
b. any adjusting journal entry necessary at December 31, Year 1
c. entry to record depreciation at December 31, Year 2
d. entry to record payment on December 31, Year 3

Question

On January 1, Year 1, Lamp Company acquires new equipment in exchange for a note.Lamp must pay a lump sum of $32,000 on December 31, Year 3.The equipment is being specifically manufactured for Lamp, so no market price exists for the equipment.On similar types of equipment purchases, Lamp has paid 15% interest.The equipment has a five-year life and the company uses straight-line depreciation with a 10% salvage value.
Required:
Prepare journal entries to record the following:
 a.	original acquisition of equipment
b.	any adjusting journal entry necessary at December 31, Year 1
c.	entry to record depreciation at December 31, Year 2
d.	entry to record payment on December 31, Year 3

Quizplus · Accepted Answer

The Answer of On January 1, Year 1, Lamp Company acquires new equipment in exchange for a note.Lamp must pay a lump sum of $32,000 on December 31, Year 3.The equipment is being specifically manufactured for Lamp, so no market price exists for the equipment.On similar types of equipment purchases, Lamp has paid 15% interest.The equipment has a five-year life and the company uses straight-line depreciation with a 10% salvage value.
Required:
Prepare journal entries to record the following:
 a.	original acquisition of equipment
b.	any adjusting journal entry necessary at December 31, Year 1
c.	entry to record depreciation at December 31, Year 2
d.	entry to record payment on December 31, Year 3

On January 1, Year 1, Lamp Company Acquires New Equipment