Question

Rodriguez Company pays $358,020 for real estate with land, land improvements, and a building. Land is appraised at $172,000; land improvements are appraised at $64,500; and a building is appraised at $193,500.

Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.

Answer 1

Ans. 1	Particular Assets	Appraised Value	Percentage of allocation (a)	Cash paid (b)	Allocated cost (a*b)
	Land	$172,000	40%	$358,020	$143,208
	Land improvements	$64,500	15%	$358,020	$53,703
	Building	$193,500	45%	$358,020	$161,109
	Total	$430,000			$358,020
	*Percentage of allocation = Particular assets's appraised value / Total appraised value * 100
	*Allocated cost = Percentage of allocation * Cash paid
Ans. 2	General Journal	Debit	Credit
	Land	$143,208
	Land improvements	$53,703
	Building	$161,109
	Cash		$358,020
	(To record the cost of purchase)