ristar Production Company began operations on September 1, 2013. Listed below ar
ID: 2487712 • Letter: R
Question
ristar Production Company began operations on September 1, 2013. 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 $200,000 in cash for the property. According to appraisals, the land had a fair value of $134,200 and the building had a fair value of $85,800. 2. On September 1, Tristar signed a $50,000 noninterest-bearing note to purchase equipment. The $50,000 payment is due on September 1, 2014. Assume that 8% is a reasonable interest rate. 3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,500. 4. On September 18, the company paid its lawyer $8,000 for organizing the corporation. 5. On October 10, Tristar purchased machinery for cash. The purchase price was $25,000 and $1,000 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 $6,500 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 $30,000. It paid $2,500 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.
Explanation / Answer
Journal entries
Serial
No.
account
Titles
Cash
*land=134200/220000×2000000=122000
**Building=85800/220000×200000=78000
***PV=50000(1.08)^-1=46296
Serial
No.
Dateaccount
Titles
Debit credit 1. Sep 1 land* 122000 Building** 78000 Cash 200000 2. Sep 1 equipment*** 46296 Discount on notes payable 3704 Notes payable 50000 3. Sep15 Truck 3500 Revenue:donation of asset 3500 4. Sep18 organization cost expenses 8000 Cash 8000 5. Oct10 Machinery 26000 Cash 26000 6. Dec2 office equipment 6500 Common stock 6500 7. Dec 10 land 30000Cash
2500 Notes payable 27500*land=134200/220000×2000000=122000
**Building=85800/220000×200000=78000
***PV=50000(1.08)^-1=46296
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