Question

A corporation purchased land, a building, and equipment for a total cost of $450,000. Fair market...

A corporation purchased land, a building, and equipment for a total cost of $450,000. Fair market values based on an appraisal were determined to be $120,000 for the land, $280,000 for the building,

and $80,000 for the equipment. The journal entry to record this purchase would include which of the following: (Answer may be rounded)

A

a debit to land for $120,000
B

a debit to building for $261,000
C

a credit to cash for $480,000
D

a debit to equipment for $85,333
E

none of the above
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Homework Answers

Answer #1
Option B a debit to building for $261,000 is correct
Workings:
Total fair value = 120000+280000+80000 = $480000
Proportion of fair values
Land 0.25 =120000/480000
Building 0.58 =280000/480000
Equipment 0.17 =80000/480000
The journal entry for Purchase will be:
Debit Credit
Land 112500 =450000*0.25
Building 261000 =450000*0.58
Equipment 76500 =450000*0.17
       Cash 450000
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