Question

Cen Co. purchases land and a building for $130,000. The land is appraised at $100,000 and the building at $150,000. Allocating the cost based on market values, the land should be recorded at what amount?

Answer 1

$52,000

Step-by-step explanation:

On the basis of it market value of $100,000 the land shall be recorded in the following way:

Cost of land=(Appraised value of land/Appraised value of land+building)*combined cost of land and building

Appraised value of land=$100,000

Appraised value of land and building=100,000+150,000=$250,000

Combined cost of land and building=$130,000

Cost of land to be recorded=(100,000/250,000)*130,000

=$52,000