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
AssetsCash $100,000
Land 70,000
Building (net) 200,000
Equipment (net) 175,000
Copyright (net) 30,000
Total Assets= 575,000
Liabilities and Stockholders' Equity
Accounts payable 50,000
Long-term notes payable 300,000
Total Liabilities 350,000
Common Stock 200,000
Retained Earnings 25,000 225,000
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.
InstructionsPrepare the entry to record the purchase of Terrell Galleries on Grafs books, each asset & liability must be stated separately