Question

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.
  

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 )