Question

A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is
a. 154,000
b. 172,000
c. 160,000
d. 120,000

Answer 1

Answer: C- 160,000

Explanation: The cost basis recorded in the buyers accounting record will recognize the purchase to be:

He acquired the property for:

Cash of                                  $40,000

90-day note payable           $45,000

Mortgage of                          $75,000

All is totaling                         $160,000

All the above listed costs are all the actual amount the acquirer paid for the property.

Answer 2

The cost basis to be recorded in the buyer's accounting records to recognize this purchase is $160,000.

Total cost of acquiring property = Cash + amount payable of 90-day note + Mortgage cost

Total cost of acquiring property = $40,000 + $45,000 + $75,000

Total cost of acquiring property = $160,000

Hence, the cost basis to be recorded in the buyer's accounting records to recognize this purchase is $160,000.

Therefore, the Option C is correct.

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