Exercise 8-5A Allocating costs on the basis of relative market values Midwest Company purchased a building and the land on which the building is situated for a total cost of $900,000 cash. The land was appraised at $200,000 and the building at $800,000. 424 Cash Chapter 8 Assets + Land + Required a. What is the accounting term for this type of acquisition? b. Determine the amount of the purchase cost to allocate to the land and the amount to allo- cate to the building. c. Would the company recognize a gain on the purchase? Why or why not? d. Record the purchase in a statements model like the following one. Building = Liab. + Equity Rev. e. Record the purchases in general journal format. LO 2 Exp. = Net Inc. Cash Flow

Exercise 8-5A Allocating costs on the basis of relative market values Midwest Company purchased a building and the land on which the building is situated for a total cost of $900,000 cash. The land was appraised at $200,000 and the building at $800,000. 424 Cash Chapter 8 Assets + Land + Required a. What is the accounting term for this type of acquisition? b. Determine the amount of the purchase cost to allocate to the land and the amount to allo- cate to the building. c. Would the company recognize a gain on the purchase? Why or why not? d. Record the purchase in a statements model like the following one. Building = Liab. + Equity Rev. e. Record the purchases in general journal format. LO 2 Exp. = Net Inc. Cash Flow

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter2: Asset And Liability Valuation And Income Recognition

Section: Chapter Questions

Problem 11PC: Costs to Be Included in Historical Cost Valuation. At a cost of 200,000, Assume In-N-Out Burger...

See similar textbooks

Similar questions

Exercise 8-3 (Algo) Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $321,165 for real estate with land, land improvements, and a building. Land is appraised at $168,000; land improvements are appraised at $63,000; and the building is appraised at $189,000.1. Allocate the total cost among the three assets.2. Prepare the journal entry to record the purchase.
Allocating payments and receipts to fixed asset accounts The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of tearing down and removing building acquired In (b) 5,000 e. Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architects and engineers fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j. Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 1. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p. Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s. Refund of premium on insurance policy (h) canceled after 11 months 500 Instructions 1.Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land improvements Building Other Accounts 2.Determine the amount debited to Land, Land Improvements, and Building. 3.The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. 4.What would be the effect on the current years income statement and balance sheet if the cost of filling and grading land of 12,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume that Land Improvements are depreciated over a 20-year life using the double-declining-balance method.
help me please
Exercise 8-3 (Algo) Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $315,900 for real estate with land, land improvements, and a building. Land is appraised at $216,000; land improvements are appraised at $96,000; and the building is appraised at $168,000. 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Allocate the total cost among the three assets. (Round your "Apportioned Cost" answers to 2 decimal places.) Percent of Total Total Cost of Appraised Acquisition Value Land Land improvements Building Totals Appraised Value $ 0 0% Required = Apportioned Cost $ Required 2 0.00
Exercise 8-3 Lump-sum purchase of plant assets LO C1 Rodriguez Company pays $368,550 for real estate with land, land improvements, and a building. Land is appraised at $225,000; land improvements are appraised at $75,000; and a building is appraised at $200,000. Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Allocate the total cost among the three assets. (Round your "Apportioned Cost" answers to 2 decimal places.) Appraised Value Percent of Total Appraised Value x Total Cost of Acquisition = Apportioned Cost Land $ 225,000 45% Land improvements 75,000 Building 200,000 Totals $ 500,000 45% 2$ 0.00 Required 1 Required 2 >
Problem 10-1A (Algo) Part 1-3 Required: 1-a. Allocate the lump-sum purchase price to the separate assets purchased. 1-b. Prepare the journal entry to record the purchase. 2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $31,000 salvage value. 3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation. Timberly Construction makes a lump-sum purchase of several assets on January 1 at a total cash price of $800,000. The estimated market values of the purchased assets are building, $526,500; land, $263,250; land improvements, $39,000; and four vehicles, $146,250. Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2 Allocate the lump-sum purchase price to the separate assets purchased. Allocation of total cost Building Land Land improvements Vehicles Total Estimated Market Value $…
Exercise 7-3A Allocate costs in a basket purchase (LO7-1) Red Rock Bakery purchases land, building, and equipment for a single purchase price of $500,000. However, the estimated fair values of the land, building, and equipment are $210,000, $330,000, and $60,000, respectively, for a total estimated fair value of $600,000. Required: Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment. X Answer is complete but not entirely correct. Estimated Fair Allocation Amount of Basket Recorded Value Percentage Purchase Amount Land $ 210,000 25 X % $ 500,000 $ 125,000 Building 330,000 65 X % 500,000 325,000 X Equipment 60,000 15 % 500,000 75,000 Total $ 600,000 $ 525,000
Exercise 7-3A Allocate costs in a basket purchase (LO7-1) Red Rock Bakery purchases land, building, and equipment for a single purchase price of $560,000. However, the estimated fair value- of the land, building, and equipment are $231,000, $363,000, and $66,000, respectively, for a total estimated fair value of $660,000. Required: Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment. Allocation Percentage Recorded Amount Amount of Basket Estimated Fair Value Purchase Land % Building Equipment % Total 2$ Next o search Designed by Apple in Califorma Assembled in China
Question 1 Focus Eye Bhd has adopted the revaluation model and the following information is related to its freehold land. Cost as at 31 Dec 2015 Fair value as at 31 Dec 2015 Fair Value as at 31 Dec 2016 Freehold land X RM1,000,000 RM1,200,000 RM900,000 Freehold Land Y RM1,100,000 RM800,000 RM1,200,000 Required: Show the journal entries to record the surplus or deficit on revaluation for the year ended 31 December 2015 and 2016. Show the extract of the statement of profit or loss and other comprehensive income for the year ended 31 December 2015 and 2016.
PARRISH 8-1 FIXED AND INTANGIBLE ASSETS-ACQUISITION OF ASSETS Please complete the following and explain the how and why of completing 1) identify the cost of the asset 2) For any costs incurred that are not included in the asset cost, specify how they would be recordedGrowth company purchaased a new mahcine for its manufacturing facility. Costs incurred in conjunction with this purchase included the following: Invoice price $90000, subject to 2/10, n/30Sales Tax $5400Freight to ship to Growth $6000Transport to factory $1900Repair of chip in machine from damage in loading $500Training of operators $3600Lunch for truck driver $25
QS 8-3 (Algo) Lump-sum purchase of assets LO C1 Diego Company paid $200,000 cash to acquire a group of items consisting of land appraised at $48,000 and a building appraised at $192,000. Allocate total cost to these two assets and prepare an entry to record the purchase.
Problem 11 Digimon Company owned three properties which are classified as investment properties. Details of the properties are as follows: Property 1 Property 2 Property 3 Initial cost 2,700,000 a. The cost model b. The fair value model 3,450,000 3,300,000 Fair value Dec. 31, 2022 3,200,000 3,050,000 3,850,000 Fair value Dec. 31, 2023 3,500,000 2,850,000 3,600,000 Each property was acquired at the beginning of 2017 with a useful life of 25 years. Compute for the total carrying amount to be reported as investment property on December 31, 2023 assuming the policy is to use: