Question

Rodriguez Company pays $305,000 for real estate plus $16,165 in closing costs. The real estate consists...

Rodriguez Company pays $305,000 for real estate plus $16,165 in closing costs. The real estate consists of land appraised at $225,000; land improvements appraised at $45,000; and a building appraised at $180,000.

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

Homework Answers

Answer #1

Answer- 1)- Allocation of total costs = Land = $160582.50

Land improvement = $32116.50

Building =$128466

Explanation-

Appraised Value % of Total Appraised Value Total cost of Acquisition Apportioned costs
Land 225000 50% 321165 160582.5
Land improvement 45000 10% 321165 32116.5
Building 180000 40% 321165 128466
450000 100% 321165

Where- Total cost of acquisition = Purchase price+ Closing costs

= $305000+$16165

= $321165

2)- Journal entry to record the purchase-

Transactions Accounts Titles & Explanation Debit Credit
$ $
1 Land 160582.5
Land improvements 32116.5
Building 128466
Cash 321165
(Being entry recorded )
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