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 $270,000 in cash for the property. According to appraisals, the land had a fair value of $185,600 and the building had a fair value of $104,400.

On September 1, Tristar signed a $57,000 noninterest-bearing note to purchase equipment. The $57,000 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 $4,200.

On September 18, the company paid its lawyer $6,000 for organizing the corporation.

On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $32,000 and $1,350 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 $7,200 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 $37,000. It paid $6,000 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. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round final answers to the nearest whole dollars.)

Answer 1

Fair Value of Land = $185600

Working -:

Fair Value of Build = $104400

Total Fair Value     = $290000

Tristar paid $270,000/$290000*$185600=$172800

Land = $270,000/$290000*$185600=$172800

Building = $270,000/$290000*$104400=$97200

Journal Entries :-

On September 1

Land A/c ------------------------Dr $172800

Building A/c --------------------Dr $97200

To Cash A/c -----------------------------------Cr   $270000  

Equipment A/c ----------------Dr $52294

Discount on note payable ---Dr $4706

To Note Payable-----------------------------------Cr $57000

PV (FV=57,000, PMT=0, n=1, i=9) = 52,294

On September 15

Truck-----------------------------Dr $4,200

To Revenue - donation of asset----------------Cr $4,200

On September 18

Organization cost expense-------------------Dr $6,000

To Cash----------------------------------------------------Cr $ 6,000

On October 10

Equipment A/c --------------------------------Dr $ 33350

To Cash ------------------------------------------------------Cr $ 33350

On December 2

Office Equipment------------------------------Dr $ 7200

To Common Stock ---------------------------------------Cr $ 7200

On December 10

Land ----------------------------------------------Dr $ 37000

To Cash -------------------------------------------------------Cr $ 6000

To Note Payable -------------------------------------------Cr $ 31000