Bixby Corporation purchased land and a building for $800,000. An appraisal indicates that the land's value is $400,000 and the building's value is $500,000. When recording this transaction Galaxy should debit:

Question

Quizplus · Accepted Answer

The total purchase price of $800,000 should be allocated between the land and the building based on their appraised values. The building's appraised value is $500,000 out of a total appraised value of $900,000 ($400,000 for land + $500,000 for building). Therefore, the building's portion of the purchase price is ($500,000/$900,000) * $800,000 = $444,444.

Bixby Corporation Purchased Land and a Building for $800,000