Allocating costs on the basis of relative market valuesDiaz Inc. purchased a building and...

Allocating costs on the basis of relative market values

Diaz Inc. purchased a building and the land on which the building is situated for a total cost of $800,000 cash. The land was appraised at $270,000 and the building at $630,000.

Required

a. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building.

b.Would the company recognize a gain on the purchase? Why or why not?

c. Record the purchase in a statements model like the following one.

d. Record the purchase in general journal format.