Carver Incorporated purchased a building and the land on which the building is situated for a total cost of $983,000 cash The land was appraised at $248 699 and the building at $881,751 Required: What is the accounting term for this type of acquisition? b. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building Would the company recognize a gain on the purchase? d. Record the purchase in a horizontal statements model.

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Q: What is the accounting term for this type of acquisition?

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Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.