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Prepare Journal Entries From Data Available From Balance Sheet

Question

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.

Summary

The question belongs to Accounting and it is about preparing journal entries based on the information given in the question which includes a balance sheet and few transactions.

Total Word Count 86


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