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 |
|
|
|
Liabilities and Stockholders' Equity |
|
|
|
|
| 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.
Prepare the entry to record the purchase of Terrell Galleries on Graf's books.