Question

Exercise 8-6A Allocating costs for a basket purchase LO 8-1 Pitney Co. purchased an office building, land, and furniture for $500,000 cash. The appraised value of the assets was as follows: Land Building Furniture Total $180.000 300,000 120,000 $600,000 Required a. Compute the amount to be recorded on the books for each asset. b. Show 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. Allocated Cost Land Buliding Furniture Total Required A Required >

Answer 1

Asset	Appraisal Value	% of Appraised Value	Allocated Cost
Land	180,000	180,000/600,000 = 30%	500,000 x 30% = 150,000
Building	300,000	300,000/600,000 = 50%	500,000 x 50% = 250,000
Furniture	120,000	120,000/600,000 = 20%	500,000 x 20% = 100,000
Total	600,000	100%	$500,000

	Allocated Cost
Land	$150,000
Building	$250,000
Furniture	$100,000
Total	$500,000

PITNEY CO.

Statement Model

Assets

Equity

Revenue

-

Expenses

=

Net Income

Cash Flows

Cash

+

Land

+

Building

+

Furniture

=

-

=

-500,000

+

150,000

+

250,000

+

100,000

=

=

-500,000

Investing activity

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