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Homework answers / question archive / Eastwood Properties bought three lots in a subdivision for a lump-sum price
Eastwood Properties bought three lots in a subdivision for a lump-sum price. An independent appraiser valued the lots as follows: Click the icon to view the values.) Eastwood paid $265,000 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. (Record a single compound Journal entry, Record dobits first, thon credits. Select the explanation on the last line of the journal ontry table.) Date Accounts and Explanation Debit Credit Land Lot 1 Land-Lot 2 Land Lot 3 265,000 Cash 0 Data Table Lot Lot 1 Lot 2 Lot 3 Appraised Value $ 255,000 229,500 25,500 Choose from any list or enter Check Answer Print Done All parts showing
Eastwood properties bought three lots of land for lump sum amount of $265000 by paying cash consideration. As per accounting standard in above-metioned case, lumpsum transaction price shall be allocated to each lot in proportion to their fair value of each property. Here appraisal values of each lot of land have given. Therefore, accordingly, we will determine each lot of land in proportion to their appraisal value.
| Particulares | Appraisal Value (A) | Percentage B =(A/510000 x 100) |
Allocated value C = B x 265000 |
| Land Lot1 | 255000 | 50.00% | 132500 |
| Land Lot2 | 229500 | 45.00% | 119250 |
| Land Lot 3 | 25500 | 5.00% | 13250 |
| Total | 510000 | 100.00% | 265000 |
Journal Entry is as follows
| Particulars | Debit | Credit |
| Land Lot1 | 132500 | |
| Land Lot2 | 119250 | |
| Land Lot 3 | 13250 | |
| CASH | 265000 |
