Question

On 4/1, Renfro Corporation purchased for $765,000 a tract of land on which was located a warehouse and an office building. The following appraised values were collected concerning the property: Land, $300,000, Warehouse $200,000, Office building $400,000. What are the amounts that Renfro should record for the land, warehouse, and office building, respectively?

Answer 1

Renfro Corporation

The amounts that Renfro should record for the land, warehouse, and office building, respectively are:

Land = $255,000

Warehouse = $170,000

Office building = $340,000

Step-by-step explanation:

a) Data and Calculations:

Purchase price = $765,000

Appraised values of:

Land = $300,000

Warehouse = $200,000

Office building = $400,000

Total appraise value = $900,000

Apportionment of Purchase Price:

Land = $255,000 ($765,000/$900,000 * $300,000)

Warehouse = $170,000 ($765,000/$900,000 * $200,000)

Office building = $340,000 ($765,000/$900,000 * $400,000)

Total = $765,000