Question

Concord Pet Care Clinic paid $200,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $105,000, the building $63,000, and the equipment $42,000.

Journalize the lump-sum purchase of the three assets for a total cost of $200,000, the amount for which the business signed a note payable.

Answer 1

The journal entry is shown below:

Land A/c Dr $100,000

Building A/c Dr $60,000

Equipment A/c Dr $40,000

To Cash A/c $200,000

(Being the lump sum amount is recorded)

Step-by-step explanation:

The journal entry is shown below:

Land A/c Dr $100,000

Building A/c Dr $60,000

Equipment A/c Dr $40,000

To Cash A/c $200,000

(Being the lump sum amount is recorded)

The computation is shown below:

= (Market value of one asset ÷ Total market value of all assets) × lump-sum amount

Where,

Total market value of all assets would be

= $105,000 + $63,000 + $42,000

= $210,000

For land, the value would be

= ($105,000 ÷ $210,000) × $200,000

= $100,000

The above formula is used for rest assets i.e equipment and the building