Question

Tristar Production Company began operations on September 1, 2021. 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 $190,000 in cash for the property. According to appraisals, the land had a fair value of $126,000 and the building had a fair value of $84,000.
2. On September 1, Tristar signed a $49,000 noninterest-bearing note to purchase equipment. The $49,000 payment is due on September 1, 2022. Assume that 10% is a reasonable interest rate.
3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,400.
4. On September 18, the company paid its lawyer $7,500 for organizing the corporation.
5. On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $24,000 and $950 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 $6,400 normal cash price. The supplier agreed to accept 200 shares of the company's no-par 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 $29,000. It paid $2,000 down and signed a 12% note with both principal and interest due in one year. Twelve 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

SOLUTION:

DATE	ACCOUNTS TITLES & EXPLANATIONS	DEBIT($)	CREDIT($)
SEP 1	LAND A/C (WORKING NOTE 1)	114000
	BUILDING A/C	76000
	TO CASH A/C		190000
	(BEING LAND AND BUILDING ACQUIRED)
SEP 1	EQUIPMENT A/C (WORKING NOTE 2)	44541
	DISCOUNT ON NOTE PAYABLE A/C	4459
	TO NOTE PAYABLE A/C		49000
	(BEING PURCHASE OF EQUIPMENT RECORDED)
SEP 15	TRUCK A/C	3400
	TO REVENUE-DONATION OF ASSETS A/C		3400
	(BEING TRUCK DONATED)
SEP 18	ORGANISATION COST EXPENSE A/C	7500
	TO CASH A/C		7500
	(BEING LEGAL EXPENSE PAID)
OCT 10	MACHINERY A/C(24000+950)	24950
	TO CASH A/C		24950
	(BEING PURCHASE OF MACHINERY RECORDED)
DEC 2	OFFICE EQUIPMENT A/C	6400
	TO COMMON STOCK A/C		6400
	(BEING OFFICE EQUIPMENT PURCHASE AGAINST COMMON STOCK)
DEC 10	LAND A/C	29000
	TO CASH A/C		2000
	TO NOTE PAYABLE A/C(29000-2000)		27000
	(BEING ACQUISITION OF TRACT OF LAND)

WORKING NOTE:

1

PARTICULARS	FAIR VALUE	% OT TOTAL FAIR VALUE	INITIAL VALUATION
LAND	126000	60%(126000/210000)	114000(190000*60%)
BUILDING	84000	40%(84000/210000)	76000(190000*40%)
TOTAL	210000		190000

2 PRESENT VALUE OF NOTE PAYMENTS:

r=10%,n=1

PV =49000*0.909

=44541

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