Question

. Wholesale Banners pays $ 300 comma 000 cash for a group purchase of​ land, building, and equipment. At the time of​ acquisition, the land has a market value of $ 33 comma 000​, the building $ 264 comma 000​, and the equipment $ 33 comma 000. Journalize the​ lump-sum purchase.

Answer 1

Answer:

Land  $30,000

building  $240,000

Equipment $30,000

        To Cash $300,000

(Being the lump sum purchase is recorded)

Explanation:

For journalizing the lump sum purchase entry first we need to compute the allocated cost assigned to each asset which is shown below

                                          (A)                                        (B)                     (A × B)

Asset          Market value  Percentage of total value Purchase price Assigned value  

Land          $33,000           10%                                    $300,000           $30,000

Building     $264,000         80%                                   $300,000          $240,000

Equipment $33,000           10%                                    $300,000           $30,000

Total value $330,000

Now the journal entry is

Land  $30,000

building  $240,000

Equipment $30,000

        To Cash $300,000

(Being the lump sum purchase is recorded)

We simply debited the assets as it increased the asset account and at the same time the cash is paid so it decreased the asset account