Question

Utica Corporation paid $360,000 to purchase land and a building. An appraisal showed that the land is worth $100,000 and the building is worth $300,000. What cost should Utica assign to the land and to the building, respectively?

Answer 1

Land 90,000 debit

Building 270,000 debit

Cash 360,000 credit

--to record the purchase of land and a building atached to the ground--

Step-by-step explanation:

To know the values we will calcualte the weights of each concept according to their fair values.

Then, we multiply these weight by the actual amount at which we purchased.

Land 100,000

Building 300,000

Total 400,000

land weight: 100,000/400,000 = 25%

buidling weight: 300,000 / 400,000 = 75%

land enter the accounting as 25% of 360,000 = 90,000

building will we posted as 75% of 360,000 = 270,000