Elm Limited had the following transactions and events during the year ended December 31, 2013.
a. In December 2013, Ami, the owner of Elm, paid for a parcel of land along with a warehouse on behalf of Elm, the registered owner of the property, for a total cost of $700,000. Ami also paid a real estate commission of $35,000 and legal fees of $5,000 in connection with this purchase, plus $25,000 for the demolition of the warehouse. Elm will reimburse Ami for these costs in January 2014 and will begin construction of an office building on this land. Prior to the purchase, the land and warehouse were appraised at $500,000 and $200,000, respectively.
b. On December 31, 2013, Elm and Mahogany Corp. exchanged equipment. The exchange met the test for commercial substance for accounting purposes. Details of the earning value and fair value of the equipment on the date of the exchange were as follows:

c. On October 1, 2013, Elm purchased some land by signing a four-year non-interest bearing note payable for $400,000. Elm pays interest at the rate of 8% on other loans and was pleased to get a non-interest-bearing note payable on this deal.
Required:
Prepare the journal entries for Elm to record the above transactions and events, as well as any related year-end adjusting entries. Ignore income taxes.

Transcribed Image Text:

Elm's equipment S500,000 200,000 350,000 Mahogany's equipment Cost Accumulated depreciation Fair value $820,000 505,000 Not determinable