Students will calculate the cost that should be assigned to land, buildings, and equipment and provide the journal entry to record the acquisition of these assets.
Sam’s Corporation paid $550,000 to acquire land, building, and equipment. At the time of the acquisition, Sam paid $50,000 to have the property appraised. The following values were determined from the appraisal:
Land
180,000
Building
285,000
Equipment
175,000
Respond to the following questions:
What cost should Sam assign to the land, buildings, and equipment, respectively?
How should the journal entry be recorded on the corporation’s books to describe this acquisition?
Why is it necessary to allocate a lump sum purchase amount among the individual assets acquired?
What are the characteristics that an asset must have for it to be classified as property, plant, and equipment?
Generally accepted accounting principles (GAAP) requires that property, plant, and equipment should be recorded at historical cost. What are the advantages of recording property, plant, and equipment at historical cost?
Please submit your assignment.
For assistance with your assignment, please use your text, Web resources, and all course materials.
The following grading criteria will be used:
Grading Guidelines
25%
What cost should Sam’s assign to the land, buildings, and equipment, respectively?
25%
How should the journal entry be recorded on the corporation’s books to describe this acquisition?
20%
Why is it necessary to allocate a lump–sum purchase amount among the individual assets acquired?
10%
What are the characteristics that an asset must have in order for it to be classified as property, plant, and equipment?
20%
Generally Accepted Accounting Principles (GAAP) requires that property, plant, and equipment should be recorded at historical cost. What are the advantages of recording property, plant, and equipment at historical cost?
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