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4 November, 04:16

Utica Corporation paid $360,000 to purchase land and a building. An appraisal showed that the land is worth $100,000 and the building is worth $300,000. What cost should Utica assign to the land and to the building, respectively?

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  1. 4 November, 07:25
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    Land 90,000 debit

    Building 270,000 debit

    Cash 360,000 credit

    --to record the purchase of land and a building atached to the ground--

    Explanation:

    To know the values we will calcualte the weights of each concept according to their fair values.

    Then, we multiply these weight by the actual amount at which we purchased.

    Land 100,000

    Building 300,000

    Total 400,000

    land weight: 100,000/400,000 = 25%

    buidling weight: 300,000 / 400,000 = 75%

    land enter the accounting as 25% of 360,000 = 90,000

    building will we posted as 75% of 360,000 = 270,000
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