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) (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 $150,000 in cash for the property. According to appraisals, the land had a fair value of $108,800 and the building had a fair value of $61, 200. On September 1, Tristar signed a $45,000 noninterest-bearing note to purchase equipment. The $45,000 payment is due on September 1, 2017. Assume that 9% is a reasonable interest rate. On September 15, a truck was donated to the corporation. Similar trucks were selling for $3,000. On September 18, the company paid its lawyer $5,500 for organizing the corporation. On October 10, Tristar purchased equipment for cash. The purchase price was $20,000 and $750 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 $6,000 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 $25,000. It paid $4,500 down and signed a 11% note with both principal and interest due in one year. Eleven 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.)

Explanation / Answer

Tristar Production Company

* Land and buiding values recorded in proportion to fair values

** Present value of note payments: PVi=9%,n=1 = $ 45,000 x 0.9174 = $ 41,283

Account Titles Debit Credit $ $ September 1 Land 96,000* Building 54,000* Cash 150,000 September 1 Equipment 41,283** Discount on note payable 3,717 Note payable 45,000 September 15 Truck 3,000 Contribution revenue-donation of asset 3,000 September 18 Organization cost expense 5,500 Cash 5,500 October 10 Equipment 20,750 Cash 20,750 December 2 Office equipment 6,000 Common stock 6,000 December 10 Land 25,000 Cash 4,500 11% Note payable 20,500

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