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Rodriguez Company pays $342,225 for real estate with land, land improvements, and a building. Land is appraised at $250,000; land improvements are appraised at $75,000; and a building is appraised at $175,000.

Required:
a. Allocate the total cost among the three assets.
b. Prepare the journal entry to record the purchase.

Respuesta :

Parrain

Answer:

a. The cost of each of the assets will be proportional based on their individual costs.

Total individual costs = 250,000 + 75,000 + 175,000

= $500,000

Cost of land = 250,000/500,000 * 342,225 = $‭171,112.5‬0

Cost of land improvements = 75,000/500,000 * 342,225 = $‭51,333.75‬

Cost of building = 175,000/500,000 * 342,225 = $‭119,778.75‬

b.

DR   Land                                                       $171,112.50

       Land Improvements                              $51,333.75

       Building                                                  $119,778.75

       CR Cash                                                                        $342,225

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