Estrada Inc. purchased a building and the land on which the building is situated for a total cost of $600,000 cash. The land was appraised at $210,000 and the building at $490,000.

Required

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.

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Liab. + Equity Assets - Exp. = Net Inc. Cash Flow Rev. Cash + Land + Building