Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,375,000. Harding paid $700,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $778,920; Building, $2,161,080 and Equipment, $786,000.What value will be recorded for the building?

Question

Quizplus · Accepted Answer

The value recorded for the building is determined by allocating the total cost of the property ($2,375,000) based on the appraised values. The total appraised value is $778,920 (Land) + $2,161,080 (Building) + $786,000 (Equipment) = $3,726,000. The building's proportion of the total appraised value is $2,161,080 / $3,726,000. This proportion is applied to the total cost of $2,375,000 to allocate the cost among the assets, resulting in $2,375,000 * ($2,161,080 / $3,726,000) = $1,377,500 for the building.

Harding Corporation Acquired Real Estate That Contained Land, Building and Equipment