Carver Inc. purchased a building and the land on which the building is situated for a total cost of $700,000 cash. The land was appraised at $320,000 and the building at $480,000.
a. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building.
b. Would the company recognize a gain on the purchase? Why or why not?
c. Record the purchase in a statements model like the following one:
d. Record the purchase in general journal format.