Question

On March 31, 2017, Kornet Investment Advisors paid $4,560,000 for land with two buildings on it. The plan was to demolish Building 1 and build a new store (Building 3) in its place. Building 2 was to be used as a company office and was appraised at a value of $1,401,600. A lighted parking lot near Building 2 had improvements (Land Improvements 1) valued at $560,640. Without considering the buildings or improvements, the tract of land was estimated to have a value of $2,709,760. Kornet incurred the following additional costs:

Cost to demolish Building 1	$	700,160
Cost of additional landscaping		271,520
Cost to construct new building (Building 3)		3,238,400
Cost of new land improvements near Building 2 (Land Improvements 2)		254,400

Required:
1. Allocate the costs incurred by Kornet to the appropriate columns and total each column.

	Land	Building 2	Building 3	Land Improvements 1	Land Improvements 2
Purchase Price
Demolition
Landscaping
New Building
New Improvements
Totals

2. Prepare a single journal entry dated March 31, 2017, to record all the incurred costs, assuming they were paid in cash on that date. (If no entry is required for a particular transaction, select "No journal entry required" in the first account field.)

Answer 1

Allocation of Purchase Price	Appraised Value	Percent of Total Appraised Value		Total cost of acquisition		Apportioned cost
Land	2709760	0.58		4560000		2644800
Building 2	1401600	0.3		4560000		1368000
Land Improvements 1	560640	0.12		4560000		547200
Totals	4672000	1				4560000
	Land	Building 2	Building 3	Land Improvements 1	Land Improvements 2
Purchase Price	2644800	1368000		547200
Demolition	700160
Landscaping	271520
New Building			3238400
New Improvements					254400
Totals	3616480	1368000	3238400	547200	254400
Date	General Journal	Debit	Credit
31-Mar	Land	3616480
	Building 2	1368000
	Building 3	3238400
	Land Improvements 1	547200
	Land Improvements 2	254400
	To Cash		9024480