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21 July, 22:49

1. Tucker Company paid $326,000 for property that included land, land improvements, and a building. The land was appraised at $175,000, the land improvements were appraised at $70,000, and the building was appraised at $105,000. What is the allocation of property costs to the three assets purchased?

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  1. 22 July, 00:00
    0
    Land = $163,000

    Improvements = $65,200

    Building = $97,800

    Explanation:

    The Allocation of property cost will be based on the ratio of appraised value of each to Total value.

    Total Value of Property = Value of Land + Value of Improvements + Value of Building = $175,000 + $70,000 + $105,000 = $350,000

    Allocation of Property cost is as follow

    Land = $326,000 x $175,000/$350,000 = $163,000

    Improvements = $326,000 x $70,000/$350,000 = $65,200

    Building = $326,000 x $105,000/$350,000 = $97,800
  2. 22 July, 00:06
    0
    Land $163,000, Land improvement $65,200, Building $97,800

    Explanation:

    The property comprises of land, land improvements and a building whose individual appraised costs are known. These individually available cost will be the basis for apportioning the actual cost of the property to the individual asset accounts.

    When an asset is purchased, the required adjusting entries are debit to asset and a credit to cash account.

    Total appraised value of the property

    = $175,000 + $70,000 + $105,000

    = $350,000

    The actual cost of;

    Land

    = ($175,000/$350,000) * $326,000

    = $163,000

    Land improvements

    = ($70,000/$350,000) * $326,000

    = $65,200

    Building

    = ($105,000/$350,000) * $326,000

    = $97,800
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