Question

A company purchases land, building and equipment for $1,500,000.

An independent appraisal shows that the best available indications
of fair value at the time of purchase are: land: $760,000;
building:

Answer 1

$620,000; equipment: $320,000.

To record the purchase of the land, building, and equipment, the company would make the following journal entry:

Land: $760,000

Building: $620,000

Equipment: $320,000

Cash (or Accounts Payable if purchased on credit): $1,500,000

The journal entry would be as follows:

Debit:

Land $760,000

Building $620,000

Equipment $320,000

Credit:

Cash (or Accounts Payable) $1,500,000

This entry reflects the acquisition of the assets and their respective values based on the independent appraisal. The total value of the assets acquired is $1,700,000, which is equal to the total cash paid or payable for the purchase.