Tristar Production Company began operations on September 1, 2018. Listed below a
ID: 2573018 • 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 $160,000 in cash for the property. According to appraisals, the land had a fair value of $117,000 and the building had a fair value of $63,000.
On September 1, Tristar signed a $46,000 noninterest-bearing note to purchase equipment. The $46,000 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 $3,100.
On September 18, the company paid its lawyer $6,000 for organizing the corporation.
On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $21,000 and $800 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 $6,100 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 $26,000. 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
TRISTAR PRODUCTION COMPANY General journal Date Account title Debit Credit Sept.1 Land 104000 Building 56000 Cash 160000 (To record purchase of land and building for cash) Sept.1 Equipment 50600 10% Note payable 46000 Interest payable 4600 (To record purchase of equipment on note payable) Sept.18 Legal charges 6000 Cash 6000 (To record legal charges paid) Oct.10 Equipment 21800 Cash 21800 (To record purchase of mainetance equipment including freight charges) Dec.2 Office equipment 6100 Common stock 6100 (To record pruchase of office equipment by issuing common stock) Dec.10 land 28520 Cash 5000 12% Note payable 21000 Interest payable 2520 (To record purchase of land for cash and note payable) As the notes payable are issued for acuiring assets , the interest payable on them is to be added to the cost of the asset.
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