Acme purchased a property that included both land and a building for $200 000. Acme hired an appraiser who determined that the market value of the land was $140 000 and the market value of the building was $50 000. At what amount should Acme record the land cost?

Question

Quizplus · Accepted Answer

The cost of the land should be recorded based on its proportionate share of the total market value. The total market value is $190,000 ($140,000 for land + $50,000 for building). The proportionate share for the land is $140,000/$190,000 of the total purchase price of $200,000, which equals $147,368.

Acme Purchased a Property That Included Both Land and a Building