Rodriguez Company pays $395,380 for real estate with land, land improvements, and a building. Land is appraised at $157,040; land improvements are appraised at $58,890; and a building is appraised at $176,670.

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. Appraised Value Percent of Total x Total Cost of Appraised Value Acquisition = Apportioned Cost Land Land improvements Building Totals Required: 1. Allocate the total cost among the three assets. 2. Prepare the journal entry to record the purchase.

1. Land = $158,152

Land improvements = $59,307

Building = $177,921

2. The entries required are;

Debit Land $158,152

Debit Land Improvement $59,307

Debit Building  $177,921

Credit  $395,380

Explanation:

The cost to be allocated to each asset is a proportion of the total cost paid for the estate. The cost of the real estate may be allocated to each asset based on the appraised value.

Total appraisal value of the real estate

= $157,040 + $58,890 + $176,670

= $392,600

To allocate the applicable percentages of cost of the various assets;

Land = ($157,040/$392,600) × 100% = 40%

Land improvements = ($58,890/$392,600) × 100% = 15%

Building = ($176,670/$392,600) × 100% = $177,921

Land = 40% × $395,380 = $158,152

Land improvements = 15% × $395,380 = $59,307

Building = 55% × $395,380 = $177,921

2. When assets are purchased, Debit Asset and Credit Cash with the cost of the asset.

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