Exercise 8-5A Allocating costs on the basis of relative market values Midwest Company purchased a building and the land on which the building is situated for a total cost of $900,000 cash. The land was appraised at $200,000 and the building at $800,000. 424 Cash Chapter 8 Assets + Land + 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 allo- cate to the building. c. Would the company recognize a gain on the purchase? Why or why not? d. Record the purchase in a statements model like the following one. Building = Liab. + Equity Rev. e. Record the purchases in general journal format. LO 2 Exp. = Net Inc. Cash Flow
Exercise 8-5A Allocating costs on the basis of relative market values Midwest Company purchased a building and the land on which the building is situated for a total cost of $900,000 cash. The land was appraised at $200,000 and the building at $800,000. 424 Cash Chapter 8 Assets + Land + 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 allo- cate to the building. c. Would the company recognize a gain on the purchase? Why or why not? d. Record the purchase in a statements model like the following one. Building = Liab. + Equity Rev. e. Record the purchases in general journal format. LO 2 Exp. = Net Inc. Cash Flow
Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter2: Asset And Liability Valuation And Income Recognition
Section: Chapter Questions
Problem 11PC: Costs to Be Included in Historical Cost Valuation. At a cost of 200,000, Assume In-N-Out Burger...
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