Reference no: EM13872377
Purpose: This exercise reviews the computations involved in a lump-sum purchase of plant assets.
The Eliason Company paid $750,000 cash for a package of plant assets. The package consisted of the following:
Land Building Equipment Tools
Total
Seller's Book Value
$ 60,000
120,000
220,000
100,000
$ 500,000
Market Value
$ 300,000
400,000
250,000
50,000
$ 1,000,000
Instructions
(a) Prepare the journal entry for Eliason to record the acquisition of these assets on the company's books.
(b) Why must you allocate the total cost to separate accounts for the individual assets? Why can't you simply use "Plant Assets" as an account and record the total cost to that account? Explain.
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