Question

XYZ Company makes a lump-sum purchase of several assets on January 1 at a total cash price of $800,000. The estimated market values of the purchased assets are building, $536,250; land, $302,250; land improvements, $68,250; and four vehicles, $68,250.

1A. Allocate the lump-sum purchase price to the separate assets purchased.

Allocation of total cost	Appraised Value	% of total appraised value	Total cost of acquisition	ApportionedCost
Building
Land
Land Improvements
Vehicles
Total

1B. Prepare the journal entry to record the purchase.

Date	General Journal	Debit	Credit
Jan 01

Options for general journal: accumulated amortization, accumulated depletion, accumulated depreciation, amortization expense, building, cash, depletion expense, depreciation expense, equipment, gain on sale of equipment, goodwill, impairment loss, land, land improvements, leasehold improvements.

2. Compute the first-year depreciation expense on the building using the straight-line method, assuming a 15-year life and a $30,000 salvage value. Round answer to the nearest whole dollar.

3. Compute the first-year depreciation expense on the land improvements assuming a five-year life and double-declining-balance depreciation.

Answer 1

1A.
	Allocation of total cost	Appraised Value	% of total appraised value	Total cost of acquisition	Apportioned Cost
	Building	536,250	55.00%	800,000	440,000
	Land	302,250	31.00%	800,000	248,000
	Land Improvements	68,250	7.00%	800,000	56,000
	Vehicles	68,250	7.00%	800,000	56,000
	Total	975,000			800,000
1B.
Date	General Journal	Debit	Credit
Jan 01	Building	440,000
	Land	248,000
	Land Improvements	56,000
	Vehicles	56,000
	Cash		800,000
2
Date	General Journal	Debit	Credit
Dec 31	Depreciation expense	27,333
	Accumulated depreciation		27,333
	(440,000 - 30,000)/15 Years
3
Date	General Journal	Debit	Credit
Dec 31	Depreciation expense	22,400
	Accumulated depreciation		22,400
	(56,000 x 40%)