Problem-
Fred Graf, owner of Graf Interiors, is negotiating for the purchase of Terrell Galleries. The balance sheet of Terrell is given in an abbreviated form below.
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TERRELL GALLERIES Balance Sheet as of December 31, 2012
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Assets
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Amount
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Liabilities and Stockholders' Equity
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Net
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Amount
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Cash
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$100,000
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Accounts payable
|
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$50,000
|
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Land
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70,000
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Notes payable (long term)
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300,000
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Buildings (net)
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200,000
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Total liabilities
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350,000
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Equipment (net)
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175,000
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Common stock
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$200,000
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|
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Copyrights (net)
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30,000
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Retained earnings
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25,000
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225,000
|
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Total assets
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$575,000
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Total liabilities and stockholders' equity
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$575,000
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Graf and Terrell agree that:
1. Land is undervalued by $50,000.
2. Equipment is overvalued by $5,000.
Terrell agrees to sell the gallery to Graf for $380,000.
Instructions-
Prepare the entry to record the purchase of Terrell Galleries on Graf's books.
Additional information-
This problem belongs to Accounting and it's about preparing journal entries based on the information given in the problem which includes a balance sheet and few transactions.