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25 February, 05:32

1. Wholesale Banners pays $ 240 comma 000 cash for a group purchase of land, building, and equipment. At the time of acquisition, the land has a market value of $ 25 comma 000 , the building $ 150 comma 000 , and the equipment $ 75 comma 000. Journalize the lump-sum purchase.

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  1. 25 February, 05:48
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    To journalize the lump-sum purchase;

    Item Value

    Land $24,000

    Building value $144,000

    Equipment value $72,000

    Lump-sum value $240,000

    Explanation:

    Step 1: Determine the total market value of the acquisition

    Total market value=land+building+equipment market value

    where;

    land market value=$25,000

    building market value=$150,000

    equipment market value=$75,000

    replacing;

    Total market value=25,000+150,000+75,000=$250,000

    Step 2: Determine the proportion of market value that contributes to the lump-sum

    Land value = (land market value/total market value) * lump-sum

    Land value = (25,000/250,000) * 240,000=$24,000

    Building value = (Building market value/total market value) * lump-sum

    Building value = (150,000/250,000) * 240,000=$144,000

    Equipment value = (Equipment value/total market value) * lump-sum

    Equipment value = (75,000/250,000) * 240,000=$72,000

    Step 3: Journalize the lump-sum purchase

    To journalize the lump-sum purchase;

    Item Value

    Land $24,000

    Building value $144,000

    Equipment value $72,000

    Lump-sum value $240,000
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