E10-3 (Acquisition Costs of Trucks) Kelly Clarkson Corporation operates a retail computer store. To im- prove delivery services to customers, the company purchases four new trucks on April 1, 2014. The terms of acquisition for each truck are described below.

Instructions

Prepare the appropriate journal entries for the above transactions for Clarkson Corporation.

1.Truck #1 has a list price of $15,000 and is acquired for a cash payment of $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 incre-

mental borrowing rate of 8%. 3.Truck #3 has a list price of $16,000. It is acquired in exchange for a computer system that Clarkson

carries in inventory. The computer system cost $12,000 and is normally sold by Clarkson for $15,200.

Clarkson 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

Clarkson Corporation. The stock has a par value per share of $10 and a market price of $13 per share.