Question

Rodriguez Company pays $352,755 for real estate with land, land improvements, and a building. Land is appraised at $250,000; land improvements are appraised at $50,000; and a building is appraised at $200,000. Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.

Answer 1

Answer and Explanation:

The computation and the journal entry is shown below;

a. The allocation of the total cost among the three assets is shown below:

(a) (b) (a × b)

Appraise value Total appraised Total cost of Apportioned

value cost

Percentage acquisition

Land $250,000 50% $352,755 $176,377.5

Land

improvemnts $50,000 10% $352,755 $35,275.5

Building $200,000 40% $352,755 $141,102

Total $500,000

b. The journal entry to record the purchase is shown below:

Land $176,377.5

Land improvements $35,275.5

Building $141,102

To Cash $352,755

(To record the purchase)

The asset is debited as it rise the assets and cash is credited as it decreased the assets