Question

The Jupiter Corporation acquired land, buildings, and equipment from a bankrupt company at a lump sum price of $96,000. The appraisal disclosed the following values:

Land $60,000
Buildings 40,000
Equipment 20,000
Which of the following amounts would be debited to the Land account?
A) $30,000
B) $32,000
C) $46,000
D) $48,000

Answer 1

The amount debited to the Land account for the Jupiter Corporation acquisition would be $48,000. This is calculated by allocating the lump sum payment proportionately based on the appraised values of the total assets.

Step-by-step explanation:

To determine the amount that would be debited to the Land account when the Jupiter Corporation acquires land, buildings, and equipment for a lump sum price, we need to allocate the total cost in proportion to the appraised values of each asset acquired.

The total appraised value for the assets is:

So, the total appraised value is $60,000 + $40,000 + $20,000 = $120,000.

To find the portion of the total payment that should be allocated to the Land account, we use the following formula:

Allocated Cost = (Individual Asset Appraised Value / Total Appraised Value) × Total Payment

For land, the calculation would be:

Allocated Land Cost = ($60,000 / $120,000) × $96,000 = $48,000

Therefore, the amount that would be debited to the Land account is $48,000.