Question

1. Wholesale Banners pays $ 240 comma 000 cash for a group purchase of​ land, building, and equipment. At the time of​ acquisition, the land has a market value of $ 25 comma 000​, the building $ 150 comma 000​, and the equipment $ 75 comma 000. Journalize the​ lump-sum purchase.

Answer 1

To journalize the lump-sum purchase;

Item Value

Land $24,000

Building value $144,000

Equipment value $72,000

Lump-sum value $240,000

Step-by-step explanation:

Step 1: Determine the total market value of the acquisition

Total market value=land+building+equipment market value

where;

land market value=$25,000

building market value=$150,000

equipment market value=$75,000

replacing;

Total market value=25,000+150,000+75,000=$250,000

Step 2: Determine the proportion of market value that contributes to the lump-sum

Land value=(land market value/total market value)×lump-sum

Land value=(25,000/250,000)×240,000=$24,000

Building value=(Building market value/total market value)×lump-sum

Building value=(150,000/250,000)×240,000=$144,000

Equipment value=(Equipment value/total market value)×lump-sum

Equipment value=(75,000/250,000)×240,000=$72,000

Step 3: Journalize the lump-sum purchase

To journalize the lump-sum purchase;

Item Value

Land $24,000

Building value $144,000

Equipment value $72,000

Lump-sum value $240,000