Answer:
1. Land cost $177,693.75
Land improvement cost $59,231.25
Building cost $157,950
.00
2. Debit Land $177,693.75
Debit Land improvements $59,231.25
Credit Building $157,950
.00
Being entry to record the cost of real estate purchased.
Explanation:
Total cost of the real estate purchase will include the closing cost which is a key cost element. The allocated costs among the 3 purchased assets will be done proportionally to the appraised cost of each asset.
Total appraised value of the real estate purchased
= $189,000 + $63,000 + $168,000
= $420,000
Total cost of real estate based on payment
= $375,000 + $19,875
= $394,875
Cost allocated to;
Land improvements = ($63,000/$420,000) × $394,875
= $59,231.25
Land = ($189,000/$420,000) × $394,875
= $177,693.75
Building = ($168,000/$420,000) × $394,875
= $157,950
.00
The entry required would be debits to the individual assets account and a lump sum credit to cash for the transaction.