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On January 1, 2020, Night’s Watch Industries purchased land with 2 buildings and equipment for a...

On January 1, 2020, Night’s Watch Industries purchased land with 2 buildings and equipment for a total cost of $4,165,000. The company planns to keep Building 1, however will demolish Building 2. The appraised value of each individual asset are shown in the table below. The cost to demolish building 2 is $95,000. Space has been provided below for your calculations (this is optional). Required Complete the table below to allocate the correct cost to each asset. Prepare the journal entry to record the purchase on January 1, 2020 assuming everything was paid in cash. PPE Asset Appraised Value Ratio Cost Allocation Land $2,420,000 Building 1 $1,860,000 Equipment $355,000 Total $4,635,000 $4,165,000 Part 2 General Journal

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Answer #1
Allocation of Total Costs Appraised Value Percentage of Total Appraised value Total Cost of Acquisition Apportioned Cost
Land $2,420,000 52.211434736% $4,165,000 $2,174,606
Building 1 $1,860,000 40.129449838% $4,165,000 $1,671,392
Equipment $355,000 7.659115426% $4,165,000 $319,002
Total $4,635,000 $4,165,000
Date Accounts and explanation Debit Credit
Jan 1,2020 Land $2,174,606
Building 1 $1,671,392
Equipment $319,002
Cash $4,165,000
(to record entry for purchase components of PPE)
Jan 1,2020 Land $95,000
Cash $95,000
(to record entr for demolition of Buildng 2)
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