Question

In Motion Upper T minus Shirts paid $ 180 comma 000 for a group purchase of​ land, building, and equipment. At the time of the​ acquisition, the land had a market value of $ 95 comma 000​, the building $ 57 comma 000​, and the equipment $ 38 comma 000. Journalize the​ lump-sum purchase of the three assets for a total cost of $ 180 comma 000​, the amount for which the business signed a note payable.

Answer 1

The Journal Entry with their narrations is shown below:-

Step-by-step explanation:

The Journal Entry is shown below:-

Land Dr, $90,000

Building Dr, $54,000

Equipment Dr, $36,000

To Notes payable $180,000

(Being Notes payable is recorded)

Working Note

Purchase price allocated to land = Paid cost × (Land value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($95,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($95,000 ÷ $190,000)

= $90,000

Purchase price allocated to building = Paid cost × (Building value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($57,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($57,000 ÷ $190,000)

= $54,000

Purchase price allocated to equipment = Paid cost × (Equipment value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($38,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($38,000 ÷ $190,000)

= $36,000