Accounting and Finance help

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Document Description

1-2 pages
Students will calculate the cost that should be assigned to land, buildings, and equipment and provide the journal entry to record the acquisition of these assets.
Sam's Corporation paid $550,000 to acquire land, building, and equipment. At the time of the acquisition, Sam paid $50,000 to have the property appraised. The following values were determined from the appraisal:
Land 180,000
Building 285,000
Equipment 175,000
Respond to the following questions:
• What cost should Sam assign to the land, buildings, and equipment, respectively?
• How should the journal entry be recorded on the corporation’s books to describe this acquisition?
• Why is it necessary to allocate a lump sum purchase amount among the individual assets acquired?
• What are the characteristics that an asset must have for it to be classified as property, plant, and equipment?
• Generally accepted accounting principles (GAAP) requires that property, plant, and equipment should be recorded at hist

Written By

Studypool Tutor
Cost apportionment work for acquisition.Total amount paid for acquisition550,000+50,000=600,000Land 180,000Building 285,000Equipment 175,000Sum total = 640,000The ratio of the cost of the plant and equipmentLand: (180,000/640,000) = 0.28125Building: (285,000/640,000) = 0.4453125Equipment :( 175,000/640,000) = 0.2734375The cost should therefore be apportioned in this mannerLand- 168,750.00Building- 267,187.50Equipment- 164,062.50Journal Entry being done on the acquirers booksRecord the followingDebit the various assets accounts and credit cash if the purchase was done using cash.PParticularsDebitLand168,750.00Building267,187.50Equipment164,062.50CreditNoCash600,000.00Why is it necessary to locate the lump sum purchase of the individual assets?When the lump sum amount of the individual asset is determined, it becomes very easy for thefirm
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