A company purchases property that includes land, buildings and equipment for $5.

Question

A company purchases property that includes land, buildings and equipment for $5.2 million. The company pays $179,000 in legal fees, $228,000 in commissions, and $103,000 in appraisal fees. The land is estimated at 25%, the buildings are at 40%, and the equipment at 35% of the property value. Required: a. Determine the total acquisition cost of this "basket purchase." (Enter your answer in whole dollars and not in millions.) Acquisition cost b. Allocate the total acquisition cost to the individual assets acquired. (Enter your answers in whole dollars and not in millions.) Land tii Equipment

Explanation / Answer

Req a: Total Acquisition cost: Purchase price 5200000 Add: Legal Fees 179000 Add: Commissions 228000 Add: Appraisal fees 103000 Total Acquisition cost: 5,710,000 Req b: Allocation of Allocation cost: Land: (5710000*25%) 1427500 Building (5710000*40%) 2284000 Equipment (5710000*35%) 1998500 Req c: Land Account Dr. 1427500 Building Account Dr. 2284000 Equipment Account Dr. 1998500      Cash account 2569500      Notes payable Account 3140500

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