A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000.
-The building will be recorded at a cost of
A) $150,000.
B) $140,000.
C) $135,000.
D) $138,461.

Question

Quizplus · Accepted Answer

The building's cost is determined by allocating the total purchase price based on the relative fair market values of the components purchased. The total purchase price is $300,000. The fair market values are $50,000 (land), $150,000 (building), and $125,000 (equipment), totaling $325,000. The building's portion of the total fair market value is $150,000/$325,000 = 46.15%. Applying this percentage to the purchase price: 46.15% of $300,000 = $138,450 (rounded to $138,461 due to the question's formatting).

A Company Purchased Property for $300,000