Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000.
-Compute the cost that should be allocated to the land.

Question

Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $35,000, a building appraised at $105,000, and paddleboats appraised at $210,000. 
-Compute the cost that should be allocated to the land.

Quizplus · Accepted Answer

We can allocate the cost of the real estate based on their appraised values. 
The total appraised value is $35,000 + $105,000 + $210,000 = $350,000 
The portion of the cost allocated to the land is: 
$35,000 / $350,000 * ($310,000 + $15,000) = $3,500 + $1,750 = $5,250 
However, we need to round this amount to the nearest thousand, which is $5,000. 
Therefore, the cost that should be allocated to the land is $32,500 ($35,000 - $5,000).

Riverboat Adventures Pays $310,000 Plus $15,000 in Closing Costs to Buy