Question

Greer Manufacturing purchases property that includes land, buildings and equipment for $4.5 million. The company pays $179,000 in legal fees, $225,000 in commissions, and $108,000 in appraisal fees. The land is estimated at 22%, the buildings are at 41%, and the equipment at 37% of the property value.

Greer Manufacturing purchases property that includes land, buildings and equipment for $4.5 million. The company pays $179,000 in legal fees, $225,000 in commissions, and $108,000 in appraisal fees. The land is estimated at 22%, the buildings are at 41%, and the equipment at 37% of the property value. Required: a. Determine the total acquisition cost of this "basket purchase". b. Allocate the total acquisition cost to the individual assets acquired. c. Prepare the journal entry to record the purchase assuming that the company paid 40% of the amounts using cash and signed a note (due in five years) for the remainder. Complete this question by entering your answers in the tabs below. Required A Required B Required C Determine the total acquisition cost of this "basket purchase". (Enter your answer in whole dollars and not in millions.) Acquisition cost Required A Required B

Answer 1

a. Total acquisition cost = $(4,500,000+179,000+225,000+108,000) = $5,012,000

b. Total acquisition cost to the individual assets acquired:

Land = $(5,012,000*22%) = $1,102,640

Buildings = $(5,012,000*41%) = $2,054,920

Equipment = $(5,012,000*37%) = $1,854,440

c. Journal Entry:

Transaction	General Journal	Debit ($)	Credit ($)
1	Land	1,102,640
	Buildings	2,054,920
	Equipment	1,854,440
	Cash		2,004,800
	Note Payable		3,007,200