Prepare the entry to record purchase of terrell galleries

Assignment Help Accounting Basics
Reference no: EM13825447

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

Amount

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

 

$575,000  

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.

Reference no: EM13825447

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