Question

Advanced Automotive pays $ 320 comma 000 for a group purchase of​ land, building, and equipment. At the time of​ acquisition, the land has a current market value of $ 70 comma 000​, the​ building's current market value is $ 35 comma 000​, and the​ equipment's current market value is $ 245 comma 000. Prepare a schedule allocating the purchase price of $ 320 comma 000 to each of the individual assets purchased based on their relative market​ values, then journalize the​ lump-sum purchase of the three assets. The business signs a note payable for the purchase price.

Answer 1

Answer:

Advanced Automotive

Allocation of Historical Cost

Land = $64,000

Building = $32,000

Equipment = $224,000

Journal Entries

Dr - Property, Plant and Equipment - $320,000

Cr - Account Payable - $320,000

Explanation:

Workings

Land = $70,000 × ($320,000/$350,000) = $64,000

Building = $35,000 × ($320,000/$350,000) = $32,000

Equipment = $245,000 × ($320,000/$350,000) = $225,000