Question

Rodriguez Company pays $355,000 for real estate plus $18,815 in closing costs. The real estate consists of land appraised at $200,000; land improvements appraised at $60,000; and a building appraised at $140,000.

Required:

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

2. Prepare the journal entry to record the purchase.

Answer 1

1
	Appraised Value	Percent of Total Appraised Value	x Total Cost of Acquisition	Apportioned Cost
Land	200,000	50%	373815	186,907.50
Land improvements	60,000	15%	373815	56,072.25
Building	140,000	35%	373815	130,835.25
Totals	400,000	100%		373,815.00
2
Transaction	General Journal	Debit	Credit
1	Land	186,907.50
	Land improvements	56,072.25
	Building	130,835.25
	Cash		373,815.00	=355000+18815