Question

Concord Pet Care Clinic paid $ 150 comma 000 for a group purchase of​ land, building, and equipment. At the time of the​ acquisition, the land had a market value of $ 80 comma 000​, the building $ 48 comma 000​, and the equipment $ 32 comma 000. Journalize the​ lump-sum purchase of the three assets for a total cost of $ 150 comma 000​, the amount for which the business signed a note payable.

Answer 1

The journal entry for the group purchase is:

Dr Land 75,000

Dr Building 45,000

Dr Equipment 30,000

Cr Note Payable 150,000

(to record purchase of fixed asset on note payable issuance)

Step-by-step explanation:

We have the total purchasing price will be allocated to Land; Building; Equipment accounts based on their percentage of market values calculated as below:

* Total market value = 80,000 + 48,000 + 32,000 = $160,000.

* Percentage allocated to Land = 80,000/160,000 = 50% => Amount allocated to land = 50% x 150,000 = $75,000.

* Percentage allocated to Building = 48,000/160,000 = 30% => Amount allocated to Building = 30% x 150,000 = $45,000.

* Percentage allocated to Equipment = 32,000/160,000 = 20% => Amount allocated to Equipment = 20% x 150,000 = $30,000.