A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is
A) $154,000
B) $172,000
C) $160,000
D) $120,000

Question

Quizplus · Accepted Answer

The cost basis recorded by the buyer includes the cash paid ($40,000) plus the value of the note payable ($45,000) plus the mortgage amount ($75,000), which totals $160,000. The offer price of $172,000 is not relevant to the cost basis recorded in the buyer's accounting records. Similarly, the appraisal value of $154,000 is not relevant as the buyer did not pay that amount for the property. Therefore, choice (C) is the best answer.

A Building with an Appraisal Value of $154,000 Is Made