Question

Exercise 10-3 Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $410,670 for real estate with land, land improvements, and a building. Land is appraised at $234,000; land improvements are appraised at $52,000; and a building is appraised at $234,000. Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.

Answer 1

Answer:

1.  Allocation of    Appraised     % of total           Total cost       Apportioned

   Total Cost           Value     appraised value   of acquisition        Cost

       Land            $234,000           45%                   $410,670      $184,801.50  

       Land            $52,000             10%                    $410,670      $41,067

  Improvements

     Building         $234,000           45%                   $410,670      $184,801.50

     Total             $520,000           100%                                       $410,670

2. Date  Accounts title and explanation       Debit          Credit

              Land                                              $184,801.50

              Land Improvements                     $41,067

              Building                                         $184,801.50

                      Cash                                                             $410,670

              (Lump-sum purchases recorded)