Darrin Brown bought a pub.The purchase price was $695,000.An appraiser provided the following appraisal values: land,$320,000;building,$370,000;and equipment,$60,000.What cost should be allocated to the building?

Question

Quizplus · Accepted Answer

The cost allocated to the building should be based on the proportion of the building's appraised value to the total appraised value of all assets. The total appraised value is $320,000 (land) + $370,000 (building) + $60,000 (equipment) = $750,000. The proportion for the building is $370,000 / $750,000. Applying this proportion to the purchase price: $695,000 * ($370,000 / $750,000) = $342,867.

Darrin Brown Bought a Pub