Question

A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised at $56,250; the land at $34,000, and the parking lot at $16,000. Land should be recorded in the accounting records with an allocated cost of:

Answer 1

Answer:

$32,000

Explanation:

Calculation for the Allocated cost of land

Using this formula

Allocated cost of land = Total purchase price * Appraised value of land / Total appraised value

Let plug in the formula

Allocated cost of land = $100,000 * $34,000 / ($56,250 + $34,000 + $16,000)

Allocated cost of land=$3,400,000,000/$106,250

Allocated cost of land= $32,000

Therefore Land should be recorded in the accounting records with an allocated cost of $34,000