Question

Tristar Production Company began operations on September 1, 2018. Listed below are a number of transactions that occurred during its first four months of operations. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.)

On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $150,000 in cash for the property. According to appraisals, the land had a fair value of $108,800 and the building had a fair value of $61,200.

On September 1, Tristar signed a $45,000 noninterest-bearing note to purchase equipment. The $45,000 payment is due on September 1, 2019. Assume that 9% is a reasonable interest rate.

On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,000.

On September 18, the company paid its lawyer $5,500 for organizing the corporation.

On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $20,000 and $750 in freight charges also were paid.

On December 2, Tristar acquired various items of office equipment. The company was short of cash and could not pay the $6,000 normal cash price. The supplier agreed to accept 200 shares of the company's nopar common stock in exchange for the equipment. The fair value of the stock is not readily determinable.

On December 10, the company acquired a tract of land at a cost of $25,000. It paid $4,500 down and signed a 11% note with both principal and interest due in one year. Eleven percent is an appropriate rate of interest for this note.

Required:
Prepare journal entries to record each of the above transactions.

Answer 1

Date	Account Title and Explanation	Debit	Credit
1-Sep	Land	96000
	Building	54000
	Cash		150000
	[Acquisiton of land and building of cash]
1-Sep	Equipment	41284
	Discount on notes payable	3716
	Notes Payable		45000
	[Notes Payable issued for equipment purchased]
	(PVF 9%, 1 year for 45000 =41284)
15-Sep	Truck	3000
	Revenue -Donation received		3000
	[Truck received on donation]
18-Sep	Organisation Expenses	5500
	Cash		5500
	[Paid to the lawyer for organisation expenses]
10-Oct	Equipment	20750
	Cash		20750
	[Purchased equipment in cash]
2-Dec	Office equipment	6000
	Common Stock		6000
	[Acquired office equipment in stock]
10-Dec	Land	25000
	Cash		4500
	Notes Payable		20500
	[Acquired land]

Working for 1st Journal Entry:

Total Fair value of land and building = $108,800 + $61,200 = $170,000

Acquired value allocated to land = (108800/170000)*150000 = $96,000

Acquired value allocated to building= (61200/170000)*150000 = $54000