Chapter 9, Problem 9.32AP

To determine

Lump-sum (Group) Purchase of asset: Lump-sum purchase is a method of assignment of the cost of land and other assets. Sometimes, a company may purchase land and other assets in a lump-sum amount. In group purchase method, the lump-sum amount is apportioned between the various components of the lump-sum purchase.

• Lump-sum purchase consists of purchase of other assets with land by paying a lump-sum amount. It is also called basket purchase.
• That lump-sum amount (100%) is apportioned among land and other asset on the basis of their separate prices.
• The separate value of the asset indicates the relative market value of the asset.

Disposal of Assets: Disposal is an activity of selling the worn-out assets that is no longer in need for the business, in return of some consideration. Disposal may be made in any of the following situations:

• Disposal with no gain no loss: When the asset is disposed with no consideration received.
• Disposal with gain: When the asset is disposed for more than its book value (original cost less accumulated depreciation).
• Disposal with loss: When the asset is disposed for less than its book value.

To record: the journal entry for the purchase of the office equipment with cash and note payable financing on January 1, 2018.

To determine

To record: the journal entry for the lump-sum purchase of land and communication equipment on April 1, 2018.

To determine

To record: the journal entry for the depreciation expense of the building sold on September 1, 2018.

To determine

To record: the journal entry for the disposal of the building on September 1, 2018.

To determine

To record: the journal entry for the depreciation expense of the communication equipment on December 31, 2018.

To determine

To record: the journal entry for the depreciation expense of the office equipment on December 31, 2018.