Tristar Production Company began operations on September 1, 2016. Listed below a

Question

Tristar Production Company began operations on September 1, 2016. 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). 1. On September 1, the company acquired five acres of land with a building that will be used as a warehouse. Tristar paid $100,000 in cash for the property. According to appraisals, the land had a fair value of $75,000 and the building had a fair value of $45,000. 2. On September 1, Tristar signed a $40,000 noninterest-bearing note to purchase equipment. The $40,000 payment is due on September 1, 2017. Assume that 8% is a reasonable interest rate. 3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $2,500. 4. On September 18, the company paid its lawyer $3,000 for organizing the corporation. 5. On October 10, Tristar purchased equipment for cash. The purchase price was $15,000 and $500 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 $5,500 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 $20,000. It paid $2,000 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: On September 1, the company paid $100,000 in cash for land and a building that will be sued as a warehouse. The land and building had fair values respectively of $75,000 and $45,000. Next Journal Entry: On September 1, Tristar signed a $40,000 non interest-bearing note to purchase equipment. The $40,000 payment is due on September 1, 2017. Assume that 8% is a reasonable interest rate. Next journal entry: On September 15, a truck was donated to the corporation. Similar trucks were selling for $2,500. Next journal entry: On September 18, the company paid its lawyer $3,000 for organizing the corporation. Next journal entry: On October 10, Tristar purchased equipment for cash. The purchase price was $15,000 and $500 in freight charges were also paid. Next journal entry: On December 2, Tristar exchanged 200 shares of the company's no par common stock for office equipment. The normal cash price of the equipment was $5,500. The fair value of the stock was not readily determinable. Next journal entry: On December 10, the company acquired land at a cost of $20,000 by paying $2,000 down and signing a 10% note with principal and interest due in one year.

Explanation / Answer

September 1

land A/c Debit$62,500 (100,000*75,000)/120,000

Building A/c Debit$37,500 ( 100,000 * 45,000 ) / 120,000

Cash A/c Credit$100,000

September 1
Equipment A/c Debit $ 40,000

Note Payable Debit $ 40,000

September 1

Donation A/c Debit $ 2,500

Truck A/c Debit $ 2,500

September 18

Legal Expense debit $ 3,000

Cash A/c credit $ 3,000

October 10

Equipment A/c debit $ 15,500

Cash A/c credit $ 15,500

December 2

Office Equipment A/c debit $ 5,500

Common Stock A/c credit $ 5,500

December 10

Land A/c debit $ 20,000

Cash A/c credit $ 2,000

Notes Payable credit $ 18,000

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