Great Plains Company has acquired a property that included both land and a building for $500,000. The company paid cash. The company hired an appraiser who has determined that the market value of the land is $300,000 and that of the building is $400,000. Journalize the lump-sum purchase. Omit explanation. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)
What will be an ideal response?
Explanation:
Cost of land = $500,000 (lump-sum purchase price) × [$300,000 (land) / ($300,000 (land) + $400,000 (building))] = $215,000
Cost of building = $500,000 (lump-sum purchase price) × [$400,000 (building) / ($300,000 (land) + $400,000 (building))] = $285,000
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