Barbarino Corporation purchased land and a building for $800,000.An appraisal indicates that the land's market value is $400,000 and the building's market value is $600,000.When recording this transaction Barbarino should debit:

Question

Quizplus · Accepted Answer

The total purchase price of $800,000 should be allocated between land and building based on their relative market values. The land's market value is 40% ($400,000/$1,000,000) and the building's market value is 60% ($600,000/$1,000,000) of the total market value. Therefore, the land should be debited for 40% of $800,000, which is $320,000.

Barbarino Corporation Purchased Land and a Building for $800,000