Concord Pet Care Clinic paid $ 150 comma 000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $ 80 comma 000 , the building $ 48 comma 000 , and the equipment $ 32 comma 000. Journalize the lump-sum purchase of the three assets for a total cost of $ 150 comma 000 , the amount for which the business signed a note payable.

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Business

Gustavo Jarvis

9 June, 00:47

Concord Pet Care Clinic paid $ 150 comma 000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $ 80 comma 000 , the building $ 48 comma 000 , and the equipment $ 32 comma 000. Journalize the lump-sum purchase of the three assets for a total cost of $ 150 comma 000 , the amount for which the business signed a note payable.

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Kirsten Armstrong · Answer 1

The journal entry for the group purchase is:

Dr Land 75,000

Dr Building 45,000

Dr Equipment 30,000

Cr Note Payable 150,000

(to record purchase of fixed asset on note payable issuance)

Explanation:

We have the total purchasing price will be allocated to Land; Building; Equipment accounts based on their percentage of market values calculated as below:

* Total market value = 80,000 + 48,000 + 32,000 = $160,000.

* Percentage allocated to Land = 80,000/160,000 = 50% = > Amount allocated to land = 50% x 150,000 = $75,000.

* Percentage allocated to Building = 48,000/160,000 = 30% = > Amount allocated to Building = 30% x 150,000 = $45,000.

* Percentage allocated to Equipment = 32,000/160,000 = 20% = > Amount allocated to Equipment = 20% x 150,000 = $30,000.