Cobb Corn Company purchases a large lot on which a building is located.The negotiated purchase price is $2,500,000 for the lot and the building.The company pays $71,500 in commissions and taxes.The appraisal values of each item is as follows: land $650,000,building $1,750,000,land improvements $120,000.What is the appropriate amount to be recorded in the general journal for the building?
A) $1,750,000
B)$1,785,650
C)$1,735,000
D)$1,685,379
E)$1,730,000

Question

Cobb Corn Company purchases a large lot on which a building is located.The negotiated purchase price is $2,500,000 for the lot and the building.The company pays $71,500 in commissions and taxes.The appraisal values of each item is as follows: land $650,000,building $1,750,000,land improvements $120,000.What is the appropriate amount to be recorded in the general journal for the building? 
A) $1,750,000
B)$1,785,650
C)$1,735,000
D)$1,685,379
E)$1,730,000

Quizplus · Accepted Answer

The appropriate amount to be recorded in the general journal for the building is the appraised value of the building, which is $1,750,000. However, since the company paid $71,500 in commissions and taxes on the purchase, this amount should be added to the recorded cost of the building. Therefore, the appropriate amount to be recorded in the general journal for the building is $1,750,000 + $71,500 = $1,785,500, which is option B.

Cobb Corn Company Purchases a Large Lot on Which a Building