Foley Distribution ServiceFoley Distribution Service

paid

$ 210 comma 000$210,000

for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of

$ 110 comma 000$110,000 ,

the building

$ 88 comma 000$88,000 ,

and the equipment

$ 22 comma 000$22,000.

Journalize the lump-sum purchase of the three assets for a total cost of

$ 210 comma 000$210,000 ,

the amount for which the business signed a note payable. (Record a single compound journal entry. Record debits first, then credits. Select the explanation on the last line of the journal entry table.

The single compound journal entry is as follows:

Land A/c Dr $105,000 ($210,000 * 0.5)

Building A/c Dr $84,000 ($210,000 * 0.4)

Equipment A/c Dr $21,000 ($210,000 * 0.1)

To Notes payable A/c $210,000

(Being the acquisition is made via note payable is recorded)

The computation is shown below:

Total market value

= Land market value + building market value + equipment market value

= $110,000 + $88,000 + $22,000

= $220,000

The proportion of each asset to market value is

Land market value $110,000 (A) 0.5 (A : D)

Building market value $88,000 (B) 0.4 (B : D)

Equipment market value $22,000 (C) 0.1 (C : D)

Total market value $220,000 (D)