Question

ristar Production Company began operations on September 1, 2021. 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 $300,000 in cash for the property. According to appraisals, the land had a fair value of $195,200 and the building had a fair value of $124,800.
2. On September 1, Tristar signed a $60,000 noninterest-bearing note to purchase equipment. The $60,000 payment is due on September 1, 2022. Assume that 9% is a reasonable interest rate.
3. On September 15, a truck was donated to the corporation. Similar trucks were selling for $4,500.
4. On September 18, the company paid its lawyer $7,500 for organizing the corporation.
5. On October 10, Tristar purchased maintenance equipment for cash. The purchase price was $35,000 and $1,500 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 $7,500 normal cash price. The supplier agreed to accept 200 shares of the company's no-par 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 $40,000. It paid $7,500 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. Round final answers to the nearest whole dollars.)

Answer 1

1.      To record the acquisition of land and building.

Land (determined below).............................................................183,000

Building (determined below)........................................................ 117,000

     Cash.......................................................................................... 300,000

Asset	Fair Value	Percent of Total  Fair Value	Initial Valuation (Percent × $300,000)
Land	$ 195,200	61%	$ 183,000
Building	124,800	39%	117,000
	$320,000	100%	$300,000

2.      To record the acquisition of equipment for cash and a note.

Equipment (determined below)..................................................... 55,044

Discount on note payable (difference).......................................... 4,956

     Note payable (face amount)...................................................... 60,000

            Present value of note payments:

            PV = $60,000 (.9174)  = $55,044

            Present value of $1: n = 1, i=9%

         3. To record the acquisition of a truck by donation.

Truck.............................................................................................. 4,500

     Revenue—donation of asset..................................................... 4,500

4.      To capitalize organization costs.

Organization cost expense............................................................. 7,500

     Cash.......................................................................................... 7,500

5.      To record the purchase of equipment.

Maintenance Equipment ($35,000 + 1500)..................................... 36,500

     Cash.......................................................................................... 36,500

6.      To record the acquisition of office equipment by the issuance of common           stock.

Office equipment........................................................................... 7,500

     Common stock.......................................................................... 7,500

7.      To record the acquisition of land in exchange for cash and a note.

Land.............................................................................................. 40,000

     Cash.......................................................................................... 7,500

     Note payable............................................................................. 32,500