Question

Boltwood

Properties bought three lots in a subdivision for a​ lump-sum price. An independent appraiser valued the lots as​ follows:

Lot		Appraised Value
1		$45,000
2		292,500
3		112,500

Boltwood paid $400,000 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

• All working forms part of the answer

Allocation of total cost	Appraised Value	Percent of Total Appraised Value		x	Total cost of Acquisition	Apportioned Cost
Lot #1	$        45,000.00	10.00%		x	$     400,000.00	$     40,000.00
Lot #2	$      292,500.00	65.00%		x	$     400,000.00	$    260,000.00
Lot #3	$      112,500.00	25.00%		x	$    400,000.00	$    100,000.00
Total	$      450,000.00	100.00%			$     400,000.00	$    400,000.00

• Journal Entry

Date	General Journal	Debit	Credit
	Land Lot #1	$        40,000.00
	Land Lot #2	$      260,000.00
	Land Lot #3	$      100,000.00
	Cash		$        400,000.00