Exciting News: Jeffers Inc. Purchases a Warehouse and Land!

Wow, what an exciting development for Jeffers Inc.! Let's dive deeper into how the company should account for the purchase of the warehouse and land.

Explanation:

When a company purchases property and buildings, it needs to allocate the total purchase price between the land and the buildings based on their respective appraised values. In Jeffers Inc.'s case, the land was appraised at $180,000 while the warehouse was appraised at $360,000, making their total appraised value $540,000. The purchase price of $450,000 is less than the total appraised value.

The allocation between the land and warehouse will be proportional based on their appraised values. For the land, the calculation would be ($180,000/$540,000) x $450,000 = $150,000. And for the warehouse, it would be ($360,000/$540,000) x $450,000 = $300,000. Therefore, the account balances Jeffers Inc. should show in its general ledger for the land and warehouse would be $150,000 and $300,000, respectively.

By properly allocating the purchase price between the land and warehouse, Jeffers Inc. will accurately reflect the value of these assets in its financial statements. This meticulous accounting practice ensures transparency and accuracy in the company's financial reporting.