Question

Carver er Inc. purchased a building and the land on which the building is situated for a total cost of $963100 cash. The land was appraised at $210.437 and the building at $897128. Required a. What is the accounting term for this type of acquisition? b. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building c. Would the company recognize a gain on the purchase? d. Record the purchase in a horizontal statements model

Answer 1

What is the accounting term for this type of acquisition?

a. this is a Basket Purchase because here two fixed assets are purchased together

b. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building

b. Allocation of Land & Building Value

Total Acquisition Price :- $963100

Total Appraised Value (210437+897128)=$1107565

Allocation to Land : $963100X 210437/1107565= $182989

Allocation to Building : $963100X 897128/1107565= $780111

c. Would the company recognize a gain on the purchase?

c. Company recognize a profit= Appraised Value- Acquision value=

=$1107565-$963100= $144465

Part-d
Date	Account Tittle	Debit	Credit
	Building	$780111
	Land	$182989
	Cash		$963100

Horizontal Analysis
Asset	Liabilities	equity	revenue	expense	net income	cash flow
cash	Building	land
-963100	780111	182989	0	0	0	0	0	-963100	Investment Activity