Allocation of cost in basket purchases. In each of the following situations, compute the amounts of gain or loss appearing on the income statement for the year, as well as the amount of asset appearing on the balance sheet as of the end of the year. Show the journal entry or entries required, and provide reasons for your decisions.

a. A company wants to acquire a five-acre site for a new warehouse. The land it wants is part of a 10-acre site that the owner insists must be purchased as a whole for $24,000. The company purchases the land, spends $3,000 in legal fees for rights to divide the site into two five-acre plots, and immediately offers half of the land for resale. The two best offers it receives are as follows:

(1) $18,000 for the east half

(2) $12,000 for the west half The company sells the east half for $18,000.

b. Assume the same data as in part

a, except the two best offers are as follows:

(1) $10,000 for the ea,st half

(2) $15,000 for the west half The company sells the west half for $15,000.

(Appendix)