Question

Exercise 10-3 Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $410,670 for real estate with land, land improvements, and a building. Land is appraised at $234,000; land improvements are appraised at $52,000; and a building is appraised at $234,000. Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.

Answer 1

1. Allocation of Appraised % of total Total cost Apportioned

Total Cost Value appraised value of acquisition Cost

Land $234,000 45% $410,670 $184,801.50

Land $52,000 10% $410,670 $41,067

Improvements

Building $234,000 45% $410,670 $184,801.50

Total $520,000 100% $410,670

2. Date Accounts title and explanation Debit Credit

Land $184,801.50

Land Improvements $41,067

Building $184,801.50

Cash $410,670

(Lump-sum purchases recorded)