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29 December, 14:41

Greer Manufacturing purchases property that includes land, buildings and equipment for $4.7 million. The company pays $185,000 in legal fees, $218,000 in commissions, and $111,000 in appraisal fees. The land is estimated at 28%, the buildings are at 40%, and the equipment at 32% of the property value. Prepare the journal entry that is required to record the purchase assuming that the company paid 50% of the amounts using cash and signed a note for the remainder.

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  1. 29 December, 15:11
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    The journal entry is shown below:

    Land A/c Dr $1,459,920

    Equipment A/c Dr $2,085,600

    Building A/c Dr $1,668,480

    To Cash A/c $2,607,000 ($5,214,000 * 50%)

    To Notes payable A/c $2,607,000 ($5,214,000 * 50%)

    (Being purchase of property is recorded)

    The total property cost would be

    = $4,700,000 + $185,000 + $218,000 + $111,000

    = $5,214,000

    Estimated value of land = $5,214,000 * 28% = $1,459,920

    Estimated value of building = $5,214,000 * 40% = $2,085,600

    Estimated value of equipment = $5,214,000 * 32% = $1,668,480
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