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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.
TERRELL GALLERIES Balance Sheet as of December 31, 2012
Assets
Amount
Liabilities and Stockholders' Equity
Net
Cash
$100,000
Accounts payable
$50,000
Land
70,000
Notes payable (long term)
300,000
Buildings (net)
200,000
Total liabilities
350,000
Equipment (net)
175,000
Common stock
$200,000
Copyrights (net)
30,000
Retained earnings
25,000
225,000
Total assets
$575,000
Total liabilities and stockholders' equity
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.
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