1. a. What is the accounting term for this type of acquisition?
ABC Company purchased a building and the land on which the building is situated for a total cost of $700,000 cash. The land was appraised at $200,000 and the building at $600,000.
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
allocate to the building.
c. Record the purchase in a statements model.
d. Record the purchase in general journal.
e. Would the company recognize a gain on the purchase? Why or why not?
Narration/Animation Script: In this exercise, we will calculate the cost allocated to both the land and the building. We will also record the purchase in a general journal and show its effects on the horizontal statements model.