Question

Pitney Co. purchased an office building, land, and furniture for $747,600 cash. The appraised value of the assets was as follows:

Land	$	92,104
Building		267,940
Furniture		477,268
Total	$	837,312

Required
a. Compute the amount to be recorded on the books for each asset.
b. Show the purchase in a horizontal statements model like the following one:
c. Prepare the general journal entry to record the purchase.

Answer 1

Answer

• Requirement [a]

Allocation of Total Cost	Appriased Value	% of total appraised value	Total cost of acquisition	Apportioned Cost
Land	$                             92,104.00	11.0%	$                   747,600.00	$                                        82,235.71
Building	$                           267,940.00	32.0%	$                   747,600.00	$                                      239,232.14
Furniture	$                           477,268.00	57.0%	$                   747,600.00	$                                      426,132.14
Total	$                           837,312.00	100%		$                                      747,600.00

--Amount to be recorded

Land	$                                        82,235.71 [or $ 82,236 if rounded off]
Building	$                                      239,232.14
Furniture	$                                      426,132.14
	$                                      747,600.00

• Requirement 2

It says “Show the purchase in a horizontal statements model like the following one:”
What ‘following’?
Please give the horizontal statement format OR Use the DETAIL BELOW in your format.

Above transaction will:
Decrease Cash by $ 747600
Increase Land by $ 82236
Increase Building by $ 239232
Increase Furniture by $ 426132
Cash Outflow in Statement of Cash Flows = $ (747,600) Investing activity.

• Requirement 3

Accounts title	Debit	Credit
Land	$               82,236
Building	$             239,232
Furniture	$             426,132
Cash		$                   747,600.00
(lumpsum purchases recorded)