Land and Warehouse Acquisition: Accounting Records
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.