Rodriguez Company pays $375,280 for real estate plus $20,100 in closing costs. The real estate consists of land appraised at $157,040; land improvements appraised at $58,890; and a building appraised at $176,670. Required: 1. Allocate the total cost among the three purchased assets. 2. Prepare the journal entry to record the purchase.

Land = $158,152

Land improvements = $59,307

Building = $177,921

Total = $395,380

Explanation:

Price paid = 375,280 + 20,100 =395,380

To Allocate we use the market values of the assets and make them their standalone prices

Land               = 157,040

improvements= 58,890

Building          = 176,670

Total                =392,600

then we use the standalone prices as ratios

Land =  395,380 * 157,040/392,600 =158,152

Improvements = 395,380 *58,890/392,600 =59,307

Building  = 395,380 * 176,670/392,600 = 177,921

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