Question

S9-2 Making a lump-sum asset purchase Concord Pet Care Clinic paid $210,000 for a group purchase of land, building and equipment. At the time of the acquisition, the land had a market value of $110.000 the building $88,000, and the equipment $22,000. Journalize the lump-sum purchase of the three assets for a total cost of $210,000, the amount for which the business signed a note payable.

Answer 1

Workings and Answer:

Workings Allocation of Appraised Total Cost Value Land $ 110,000 Building $ 88,000 Percentage of Total Appraised Value Calculation 50% (110,000/220,000) 40% (88,000/220,000) Total Cost of Acquisition $ 210,000 $ 210,000 Apportioned Cost Calculation $ 105,000 (210,000 X 50%) $ 84,000 (210,000 X 40%) Equipment Total $ $ 22,000 220,000 10% (22,000/220,000) 100% $ $ 210,000 $ 210,000 $ 21,000 (210,000 X 10%) 210,000 Land Journal Entry General Date Journal Debit Credit 105,000 Building 84,000 Equipment 21,000 Notes Payable 210,000 - (To record the purchase of land, building and equipment by way of - issuing notes payable)