Question

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $53,000; the land at $52,200, and the parking lot at $19,800. Land should be recorded in the accounting records with an allocated cost of:

Answer 1

Answer:

Allocated cost of land = $41,760

Explanation:

We know,

Allocated cost of non-current asset = $\frac{The appraised value of non-current asset}{Total appraisal value of non-current asset}$ × Total value of non-current asset

Given,

Total value of property = $100,000

The appraised value of Land = $52,200

The appraised value of Building = $53,000

The appraised value of parking lot = $19,800

Therefore, Total appraisal value of Land, building, and parking lot = $(52,200 + 53,000 + 19,800) = $125,000

Allocated cost of land = $\frac{52,200}{125,000}$ × $100,000

Allocated cost of land = 0.4176 x $100,000

Allocated cost of land = $41,760