In December 2019, Bea, the Owner of Walnut Corp, Paid

question 69

Essay

In December 2019, Bea, the owner of Walnut Corp, paid for a parcel of land along with a warehouse on behalf of Walnut, the registered owner of the property, for a total cost of $1,500,000. Bea also paid a real estate commission of $40,000 and legal fees of $10,000 in connection with this purchase, plus $30,000 for the demolition of the warehouse. Walnut will reimburse Bea for these costs in January 2020 and will begin construction of an office building on this land. Prior to the purchase, the land and warehouse were appraised at $900,000 and $600,000, respectively.
On December 31, 2019, Walnut Corp and Teak Corp. exchanged equipment. The exchange met the test for commercial substance for accounting purposes. Details of the carrying values and fair values of the equipment on the date of the exchange were as follows:
$$\begin{array} { | l | r | r | } \hline & \text { Walnut equipment } & \text { Teak equipment } \\\hline \text { Cost } & \$ 800,000 & \$ 915,000 \\\hline \text { Accumulated depreciation } & 400,000 & 490,000 \\\hline \text { Fair value } & 460,000 & \text { Not determinable } \\\hline\end{array}$$ On October 1, 2019, Walnut purchased some land by signing a three-year non-interest-bearing note payable for $500,000. Walnut pays interest at the rate of 12% on other loans and was pleased to get a non-interest-bearing note payable on this deal.
Required:
Prepare the required journal entries for these transactions, as well as any related year-end adjustments. Ignore income taxes. Round all values to the nearest dollar, if necessary.

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Definitions:

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