Question

Pitney Co. purchased an office building, land, and furniture for $618,600 cash. The appraised value of the assets was as follows: Land Building Furniture Total $110,853 193,993 387,986 $692.832 Required a. Compute the amount to be recorded on the books for each asset. b. Record the purchase in a horizontal statements model. Complete this question by entering your answers in the tabs below. Required A Required B Compute the amount to be recorded on the books for each asset. (Do not round Intermediate calculations. Round your final answers to nearest whole dollar.) Land Building Allocated Cost $ 98,880 173,040 346,080 $ 618,000 Fumture Required 8 > < Prey 2 of 7 !!! Next >

Answer 1

Calculation of amount to be recorded on the books for each asset: The appraisal at the time of the purchase indicates that the land has a market value of $110,853, the building has a market value of $193,993 and furniture has the market value of $387,986 for a total market value of $692,832. In other words, the appraisal indicates that the land is 16% ($110,853/$692,832) of the market value the building is 28% ($193,993/$692,832) of the market valuevalue and furniture is 56% ($387,986/692,832) of the market value. Purchase value of land, building and furniture is $618,600 Book value of Land = 16% of $618,600 = $98,976 Book value of Building = 28% of $618,600 = $173,208 Book value of Furniture = 56% of $618,600 =$346,416 ь Record the purchase in horizontal statement model Balance Sheet Income Statement Event No. Assets Land Cash + -618600+ Revenue + 98976 + = Liability Building + Furniture - Liability 173208 + 346416 = + Equity 0+ - Expenses 0- Cash Flow = Net Income 0 = 0 -618000 1 0