Question

ost Attendee Zoom (1) WhatsApp 2. United Alliance Inc. paid $1,000,000 to purchase land and equipment as a package at the beginning of 2018. If the land and equipment are sold separately, land would be priced at 650,000 and equipment would be priced at $450,000. United Alliance estimated the useful life of the equipment to be 5 years with the salvage value of $50,000 or 800,000 units. The equipment produced 50,000 units in 2018. (30 marks) Required: a. Determine the purchase price for the land and the equipment and prepare the journal entry for the purchases. 3 of 7 ORI E BD 6 OP - - ► prt se delete SUOI 6 7 8 2 9 - 3 0 1/4 V2 3/4 Y U { O con Р का [[ Н J K K

Answer 1

Ans:

We will determine the purchase price of land and equipment on a proportionate basis

Purchase price of land- (Combined purchase price) / (Individual purchasr price of land + Individual purchasr price of equipment)* Individual purchase price of land

=1000000/(650000+450000) * 650000

=1000000/1100000 * 650000

=$590910 (rounded off to nearest multiple)

And puchase price of Equipment will be = $1000000 - $590910 = $409090

Journal entry

Date	Account Name	Debit ($)	Credit ($)
2018	Land	$590910
	Cash/Bank		$590910
	(Being Land purchased)
2018	Equipment	$409090
	Cash/Bank		$409090
	(Being Equipment Purchased)