Ans:
Journal Entry
The journal entry to record the lump-sum purchase:
Date |
Accounting Entry and Explanation |
Debit |
Credit |
Land |
$75000 |
||
Building |
$60000 |
||
Equipment |
$15000 |
||
Cash |
$150000 |
Calculations:
Particulars |
Amount |
Land |
$80,000 |
Building |
$64,000 |
Equipment |
$16,000 |
Total Fair Value |
$160,000 |
Formula
Fixed assets purchased for lump-sum are therefore recorded at a value calculated using their respective market values using total market value
Value of Asset = |
Fair value of each asset |
× Lump sum Amount Paid |
Total Fair value of assets |
Value calculation:
Land=150,000*80,000/160,000=$75,000
Building=$150,000*64,000/160,000=$60,000
Equipment=$150,000*16000/160,000=$15000
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