In Motion Upper T minus Shirts paid $ 180 comma 000 for a group purchase of land, building, and equipment. At the time of the acquisition, the land had a market value of $ 95 comma 000, the building $ 57 comma 000, and the equipment $ 38 comma 000. Journalize the lump-sum purchase of the three assets for a total cost of $ 180 comma 000, the amount for which the business signed a note payable.

The Journal Entry with their narrations is shown below:-

Explanation:

The Journal Entry is shown below:-

Land Dr,                        $90,000

Building Dr,                   $54,000

Equipment Dr,               $36,000

      To Notes payable                $180,000

(Being Notes payable is recorded)

Working Note

Purchase price allocated to land = Paid cost × (Land value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($95,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($95,000 ÷ $190,000)

= $90,000

Purchase price allocated to building = Paid cost × (Building value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($57,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($57,000 ÷ $190,000)

= $54,000

Purchase price allocated to equipment = Paid cost × (Equipment value ÷ (Land value + Building value + Equipment value)

= $180,000 × ($38,000 ÷ ($95,000 + $57,000 + $38,000)

= $180,000 × ($38,000 ÷ $190,000)

= $36,000

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