Question

rodriguez Company pays $352,755 for real estate with land, land improvements, and a building. Land is appraised at $225,000, land improvements are appraised at $75,000, and a building is appraised at $200,000. Required: 1. Allocate the total cost among the three

Answer 1

To allocate the total cost among land, land improvements, and a building, we can calculate the percentage of the total appraised value that each category represents and then calculate the allocated cost for each category.

Step-by-step explanation:

To allocate the total cost among the three categories, we need to determine the percentage of the total appraised value that each category represents:

Land: $225,000 / ($225,000 + $75,000 + $200,000) = 38.67%

Land Improvements: $75,000 / ($225,000 + $75,000 + $200,000) = 12.92%

Building: $200,000 / ($225,000 + $75,000 + $200,000) = 48.41%

Now we can calculate the allocated cost for each category:

Land: 38.67% * $352,755 = $136,316.71

Land Improvements: 12.92% * $352,755 = $45,599.86

Building: 48.41% * $352,755 = $170,838.43