Question

Rodriguez Company pays $365,000 for real estate plus $19,345 in closing costs. The real estate consists of land appraised at $196,000; land improvements appraised at $49,000; and a building appraised at $245,000.

Required:

1. Allocate the total cost among the three purchased assets.

2. Prepare the journal entry to record the purchase.

Answer 1

Answer:

1	Total Cost of acquisition = 365000+19345	384345
			Appraised Value	Percent of Total appraised value	*Total cost of acquisition	Apportioned cost
	Land		$196000	0.40	$384,345	$153,738
	Land Improvements	$49000	0.1	$384,345	$38,434.5
	Building		$245000	0.50	$384,345	$192,172.5
	Totals		$490000			$384,345
2	Journal Entry	Debit	Credit
	Land		$153,738
	Land Improvements	$38,434.5
	Building		$192,172.5
	To Cash			$384,345