Land and Warehouse Acquisition: Accounting Records

How should the amounts for the land and the warehouse be recorded in the accounting records if their estimated values are $380,000 and $710,000 respectively, and the total purchase price was $720,000? The recorded value for the land should be $251,280, and for the warehouse should be $468,720 after applying the corresponding percentages of their appraisal values to the total purchase price.

When acquiring both the land and warehouse for a total purchase price of $720,000, an appraisal showed that the estimated value of the land is $380,000 and the warehouse is $710,000.

To determine how much should be recorded in the accounting records for each property, we first calculate the total appraised value by adding the individual values: $380,000 + $710,000 = $1,090,000.

The next step is to find the percentage that each property's appraised value represents in the total value. The land's percentage would be ($380,000 / $1,090,000) × 100, which is approximately 34.9%, while the warehouse's percentage would be ($710,000 / $1,090,000) × 100, approximately 65.1%.

By applying these percentages to the total purchase price of $720,000, we can determine the amounts that should be recorded in the accounting records:

  • Land: 34.9% of $720,000 = $251,280
  • Warehouse: 65.1% of $720,000 = $468,720

Thus, based on the appraisal values, the recorded amounts for the land and warehouse should be $251,280 and $468,720 respectively.

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