Question

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $60,500; the land at $46,200, and the parking lot at $18,300. Land should be recorded in the accounting records with an allocated cost of:

Answer 1

Land should be recorded in the accounting records with an allocated cost of: $ 36,960

Step-by-step explanation:

1. Let's calculate the total appraised value:

Appraised value = 60,500 + 46,200 + 18,300

Appraised value = 125,000

2. Let's calculate what percentage of the appraised value, the land value is:

Percentage = Appraised value of the land/Total appraised value

Percentage = 46,200/125,000 * 100

Percentage = 0.3696 * 100 = 36.96%

3. Finally, let's calculate the allocated cost of the land, this way:

Allocated cost of the land = Percentage * Total of the property purchase

Allocated cost of the land = 0.3696 * 100,000

Allocated cost of the land = $ 36,960