Tristar Production Company began operations on September 1, 2018. Listed below a
ID: 2528367 • Letter: T
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 $250,000 in cash for the property. According to appraisals, the land had a fair value of $178,200 and the building had a fair value of $91,800. On September 1, Tristar signed a $55,000 noninterest-bearing note to purchase equipment. The $55,000 payment is due on September 1, 2019. Assume that 10% is a reasonable interest rate. On September 15, a truck was donated to the corporation. Similar trucks were selling for $4,000. On September 18, the company paid its lawyer $5,000 for organizing the corporation. On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $30,000 and $1,250 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 $7,000 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 $35,000. It paid $5,000 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.)
Explanation / Answer
Asset
Fair Value
Percentage of Total Fare Value
Initial Valuation
Land
$178,200
66
$165,000
Building
$91,800
34
$85,000
Total
$270,000
100
$250,000
PV(FV=55,000, PMT=0, n=1, i=10) = 55,000*0.909=49,995
Equipment 49,995
Discount on note payable 5,005
Note payable 55,000
Truck 4,000
Revenue - donation of asset 4,000
Organization cost expense 5,000
Cash 5,000
Machinery 31,250
Cash 31,250
Office Equipment 7,000
Common Stock 7,000
Land 35,000
Cash 5,000
Note Payable 30,000
Asset
Fair Value
Percentage of Total Fare Value
Initial Valuation
Land
$178,200
66
$165,000
Building
$91,800
34
$85,000
Total
$270,000
100
$250,000
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