Exercise 4: Lump Sum Purchases

Pinsker Company purchased several assets of a small business that is in the process of liquidating. Pinsker paid $600,000 for these assets, which consist of land, building and inventory. The fair values are given in the table below:

Asset	Fair Value	Proportion	Allocation Calculation	Allocated Cost
Land	$270,000
Building	360,000
Inventory	90,000
Total	$720,000

1. Compute the allocated cost for the assets acquired in the table above (the computation for land is given compute the rest).

2. Prepare the journal entry to record the purchase of the assets, assuming $200,000 was paid in cash and an interest-bearing note was issued for the balance.