Kolonial Township acquired a building and the 3 acres of land on which it is loc
ID: 2502003 • Letter: K
Question
Kolonial Township acquired a building and the 3 acres of land on which it is located. The total purchase price was $2,500,000. For valuation purposes, the company contacted three local commercial real estate agents, who gave the following valuation estimates: Land Building M. Mulhan $900,000 $2,100,000 H. Ivan $300,000 $2,700,000 T. Grasso $600,000 $2,400,000 If Kolonial Township used the valuation made by H. Ivan, and assuming it paid cash for the land and building, what journal entry would Kolonial Township make to record the purchase? A) Land 600,000 Building 2,400,000 Cash 3,000,000 A) Land 750,000 Building 1,750,000 Cash 2,500,000 B) Land 500,000 Building 2,000,000 Cash 2,500,000 C) Land 300,000 Building 2,700,000 Cash 3,000,000 D) Land 250,000 Building 2,250,000 Cash 2,500,000 E) Land 300,000 Building 2,750,000 Cash 2,500,000 Gain on Purchase of Assets 500,000
Explanation / Answer
Answer no. D
Note : Composite cost of Land and Building are allocated on the basis of value on valution.
Land = 2500000 * 300000/3000000 = 250000
Building = 2500000 * 2700000/ 3000000 = 2250000
Account Title & Explanation Debit credit Land 250000 Building 2250000 Cash 2500000Related Questions
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