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

Question

A company purchases property that includes land, buildings and equipment for $5.0 million. The company pays $184,000 in legal fees, $219,000 in commissions, and $103,000 in appraisal fees. The land is estimated at 21%, the buildings are at 38%, and the equipment at 41% 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 Buildings Equipment

Explanation / Answer

a. Total acquisition cost of this "basket purchase" = $50,00,000 + $184,000 + $219,000 + $103,000
= $5,506,000

b. Allocation of cost of assets

c. Journal Entry

Amount($) Land $5,506,000 x 21% = $1,156,260 Building $5,506,000 x 38% = $2,092,280 Equipment $5,506,000 x 41% = $2,257,460

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