Kolonial Township Acquired a Building and the 3 Acres of Land

question 122

Multiple Choice

Kolonial Township acquired a building and the 3 acres of land on which it is located.The total purchase price was $2,500,000.For valuation purposes,the company contacted three local commercial real estate agents,who gave the following valuation estimates: $\begin{array}{lrr}& \text { Land } & {\text { Building }} \\\text { M. Mulhan } & \$ 900,000 & \$ 2,100,000 \\\text { H. Ivan } & \$ 300,000 & \$ 2,700,000 \\\text { T. Grasso } & \$ 600,000 & \$ 2,400,000\end{array}$
If Kolonial Township used the valuation made by M.Mulhan and assuming it paid cash for the land and building,what journal entry would Kolonial Township make to record the purchase?

• A) \(\begin{array} { l l l }
• \text { Land } & 750,000 & \\
• \text { Buiding } & 1,750,000 & \\
• \end{array}\)
• B)\(\begin{array}{lccc}
• \text { Cash } & & 2,500,000\\
• \text { Land } & 500,000 & \\
• \text { Building } & 2,000,000& \\
• \text { Cash } & &2,500,000 \\
• \end{array}\)
• C)\(\begin{array}{lccc}
• \text { Land } & 900,000 & \\
• \text { Buiding } & 2,100,000 & \\
• \text { Cash } & & 300,000 \\
• \end{array}\)
• D)\(\begin{array}{lccc}
• \text { Land } & 833,250& \\
• \text { Building } &830,750 & \\
• \text { Cash } & & 2,500,000\\
• \end{array}\)
• E)\(\begin{array}{lccc}
• \text { Land } & 900,000 & \\
• \text { Building } & 2,100,000 & \\
• \text { Cash } & & 2,500,000 \\
• \text { Gain on Purchase of Assets } & & 500,000
• \end{array}\)

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