A company buys a parcel of land on which are erected two buildings. The first building is a 100,000 square-foot warehouse and the second building is a 25,000 square-foot garage and maintenance building. The respective fair market values for the land, the warehouse, and the garage are $125,000, $200,000, and $75,000. The company paid $210,000 for all three assets. What amounts should be allocated to the land and the garage? Round your answers to the nearest whole number.

The allocation would be done using the fair market values as basis. Fair market value is more appropriate as a basis instead of using the sizes of the building and the garage as basis.

Total fair market values = $125,000 + $200,000 + $75,000 = $400,000

Total amount paid for all assets = $210,000

Amount allocated to each asset = [tex]\frac{asset's fair market value}{total market value} *total amount paid for all assets[/tex]

Amount allocated to land = [tex]\frac{$125,000}{$400,000} *$210,000[/tex]

= $65,625

Amount allocated to warehouse = [tex]\frac{$200,000}{$400,000} *$210,000[/tex]

= $105,000

Amount allocated to garage = [tex]\frac{$75,000}{$400,000} *$210,000[/tex]

= $39,375