Question

Riverwood Properties bought three lots in a subdivision for a? lump-sum price. An independent appraiser valued the lots as?

Lot Appraised Value

Lot 1.............76,500
Lot 2.............229,500
Lot 3.............204,000

Riverwood paid $ 355,000 in cash. Record the purchase in the journal, identifying each lot's cost in a separate Land account. Round decimals to two places, and use the computed percentages throughout?

Answer 1

Answer:

Explanation:

The cost allocation of each lot is presented below:

                                          (A)                      (B)                            (A × B)

Lot       Appraised Value  Percentage  Purchase value          Allocated cost      

Lot 1        $76,500               15%               $355,000                 $53,250

Lot 2       $229,500             45%             $355,000                  $159,750

Lot 3      $204,000             40%            $355,000                   $142,000

Total      $510,000              100%                                              $355,000

Now the journal entry would be

Land - Lot 1 $53,250

Land - Lot 2  $159,750

Land - Lot 3   $142,000

     To Cash A/c $355,000

(Being the lots are purchased for cash)