Question

Bonner company paid $855,000 for a tract of land which included a warehouse and office building. The land, warehouse and office building originally cost $280,000, $180,000, and $340,000 respectively and the current assessed values are $300,000, $200,000, and $400,000 respectively. How should Bonner calculate what value to record for Land?

a. 300,000/ 800,000 x 855,000
b. 280,000/900,000 x 855,000
c. 280,000 /800,000 x 855,000
d. 300,000/900,000 x 855,000

Answer 1

Bonner Company

Bonner should calculate the value to record for Land as follows:

d. 300,000/900,000 x 855,000

Step-by-step explanation:

The Land should be recorded at $285,000 based on the above mentioned formula. The formula considers the current assessed value of the Land versus the amount paid by Bonner for the group of assets (Land, Warehouse and Office Buildings). The computation of the value at which to record the Land and other assets must be proportional to the current assessed values.