Respuesta :
Answer:
The allocation of cost is as follows:
land is $161,109
improvement is $71,604
buildings is $125,307
The journal entries are:
Dr Land $161,109
Dr Improvement $71,604
Dr buildings $125,307
Cr Cash $358,020
Explanation:
The allocation of the purchase price of $358,020 between the three distinct assets can be done on the proportion of their appraised values as computed below
Asset allocated value=the asset appraised value/total assets' appraised value*original purchase price
Land allocated value=$202,500/($202500+$90000+$157500)*$358020
=$161,109.00
Improvement allocated value=$90,000/($202500+$90000+$157500)*$358020
= $71,604.00
Buildings allocated value=$157,500/($202500+$90000+$157500)*$358020
=$125,307
Answer:
1. Land $161,109, Land improvement $71,604, Building $125,307
2. Entries required
Debit Land $161,109
Debit Land improvement $71,604
Debit Building $125,307
Credit Cash account $358,020
Being entries to record the purchase of real estate consisting of land, land improvement and a building.
Explanation:
The real estate comprises of land, land improvements and a building whose individual appraised costs are known. These individually available cost will be the basis for apportioning the actual cost of the real estate to the individual asset accounts.
When an asset is purchased, the required adjusting entries are debit to asset and a credit to cash account.
Total appraised value of the real estate
= $202,500 + $90,000 + $157,500
= $450,000
The actual cost of;
Land
= ($202,500/$450,000) * $358,020
= $161,109
Land improvements
= ($90,000/$450,000) * $358,020
= $71,604
Building
= ($157,500/$450,000) * $358,020
= $125,307
