Question

Concord Pet Care Clinic paid $150,000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $80,000, the building $64,000, and the equipment $16,000. Journalize the lump-sum purchase of the three assets for a total cost of $150,000, 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.) Date Accounts and Explanation Debit Credit

Answer 1

Ans:

Journal Entry

The journal entry to record the lump-sum purchase:

Date	Accounting Entry and Explanation	Debit	Credit
	Land	$75000
	Building	$60000
	Equipment	$15000
	Cash		$150000

Calculations:

Particulars	Amount
Land	$80,000
Building	$64,000
Equipment	$16,000
Total Fair Value	$160,000

Formula

Fixed assets purchased for lump-sum are therefore recorded at a value calculated using their respective market values using total market value

Value of Asset =	Fair value of each asset	× Lump sum Amount Paid
	Total Fair value of assets

Value calculation:

Land=150,000*80,000/160,000=$75,000

Building=$150,000*64,000/160,000=$60,000

Equipment=$150,000*16000/160,000=$15000