Question

Problem 10-1 Acquisition costs [LO10-1, 10-2, 10-3, 10-4]

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.)

1. On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $230,000 in cash for the property. According to appraisals, the land had a fair value of $160,000 and the building had a fair value of $90,000.
2. On September 1, Tristar signed a $53,000 noninterest-bearing note to purchase equipment. The $53,000 payment is due on September 1, 2019. Assume that 8% is a reasonable interest rate.
3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,800.
4. On September 18, the company paid its lawyer $4,000 for organizing the corporation.
5. On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $28,000 and $1,150 in freight charges also were paid.
6. On December 2, Tristar acquired various items of office equipment. The company was short of cash and could not pay the $6,800 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.
7. On December 10, the company acquired a tract of land at a cost of $33,000. It paid $4,000 down and signed a 10% note with both principal and interest due in one year. Ten 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

Journal entries

September 1 cash a/c..................................Dr $230000

Reserve a/c.............................Dr $20000

To warehouse a/c $250000

( Being the land and building purchased

and used as warehouse and profit recognized

Is transfered to reserve)

September 1 equipment a/c.....................Dr 53000

To 8% note payable a/c 53000

(Being the equipment purchased and issue

A 8% note payable)

Sep 15 donations a/c.......................Dr $ 3800

To truck a/c 3800

(Being the truck valued 3800 is dobated

by the company )

Sep 18 preliminary expenses a/c......Dr 4000

To cash a/c 4000

(Being the cash paid to lawyer for forming of company)

October 10 maintenance equipment a/c........Dr 29150

To cash a/c 29150

(Being the cash paid for pur gade of equipment)

December 2 equipment a/c ...........................Dr 6800

To common stock a/c 6800

(Being the equipment purchased and issued common stock for the seller)

December 10 land a/c.......................Dr 33000

To cash a/c 4000

To 10% notes payable a/c 29000

(Being the land purchased and paid downpayment of 4000 and issue a note payable for the rest of 29000)

These are all the entries for the given question.

I hope, all the above mentioned entries are useful and helpful to you.

Thank you.