Question

Zabinski Co. paid $150,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $20,000, Building, $150,000, and Office furniture, $30,000. Based on this information the cost that would be allocated to the land is ______.

Answer 1

Answer:

cost to be allocated to land = $15,000

Explanation:

given data

purchase = $150,000

market values Land = $20,000

market values Building = $150,000

market values Office furniture =  $30,000

solution

we get here market value of all assets that is

market value of all assets = $20,000+ $150,000 + $30,000

market value of all assets  = $2,00,000

and

now we get cost allocated to land that is basis on the ratio of market value of land to the total market value of all assets

so here

cost to be allocated to land = purchase price of all assets ( market value of land ÷ market value of all assets).  .......................1

cost to be allocated to land = $150,000 ×  $\frac{20000}{200000}$  

cost to be allocated to land = $15,000