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, $740,000; Building, $2,200,000 and Equipment, $1,460,000.What value will be reported for the land on the balance sheet? (Round intermediate percentage values to a whole percentage. Do not round other intermediate calculations.)

Question

Quizplus · Accepted Answer

To calculate the value of the land, we need to allocate the total cost of $2,375,000 based on the appraised values. The percentage that the land is of the total appraised value is ($740,000/$4,400,000) * 100% = 16.82%. Therefore, the value of the land on the balance sheet will be $2,375,000 * 16.82% = $399,775. However, since we only paid $700,000 for the entire property, we need to adjust the land value downward accordingly: $700,000 * 16.82% = $117,580. Finally, since we want to report the land value on the balance sheet, we round up to the nearest dollar: $117,580 rounded to the nearest dollar is $187,600, which is option C.

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