Question

Exercise 12-11 Fred Moss, owner of Moss Interiors, is negotiating for the purchase of Sunland Galleries. The balance sheet of Sunland is given in an abbreviated form below. SUNLAND GALLERIES BALANCE SHEET AS OF DECEMBER 31, 2017 Liabilities and Stockholders Equity Accounts payable Assets $51,000 303,300 354,300 $118,000 Cash Land Buildings (net) 201,300 Equipment (net) 176,300 Copyrights (net)31,300 Total assets $598,200 71,300Notes payable (long-term) Total liabilities Common stock Retained earnings Total liabilities and stockholders' equity $210,900 33,000 243900 $598,200 Moss and Sunland agree that: 1. Land is undervalued by $42,600. 2. Equipment is overvalued by $4,700 Sunland agrees to sell the gallery to Moss for $380,600. Prepare the entry to record the purchase of Sunland Galleries on Moss's books. (Credit account titles are automatically indented when select No Ftowi foc the account titles and enter 0 for the

Answer 1

Account Titles and Explanation	Debit	Credit
Cash	$ 1,18,000
Land ($71300 + $42600)	$ 1,13,900
Building	$ 2,01,300
Equipment ($176300 - $4700)	$ 1,71,600
Copyright	$     31,300
Goodwill	$     98,800
Accounts payable		$      51,000
Notes payable (Long term )		$   3,03,300
Cash		$   3,80,600
(Being purchase of Sunland galleries recorded)
Workings:
Assets	=	$   5,98,200
Liabilities	=	$ -3,54,300
Net Assets	=	$   2,43,900
Adjustments:
Increase in Land	=	$      42,600
Decrease in Equipment	=	$       -4,700
Net Assets after adjustment	=	$   2,81,800
Selling Price	=	$   3,80,600
Net Assets after adjustment	=	$ -2,81,800
Goodwill	=	$      98,800