Tonto Company purchased property for $280,000.The property included a building,equipment and land.The building was appraised at $173,600,the land at $126,000,and the equipment at $50,400.What is the amount of cost to be allocated to the building in the accounting records?
A)$93,333
B)$138,880
C)$173,600
D)$280,000

Question

Quizplus · Accepted Answer

Total market value = $173,600 + $126,000 + $50,400 = $350,000
Building's contribution towards property's value = Building's market value ÷ Total market value
= $173,600 ÷ $350,000 = 49.6%
Building cost = Property cost × Building's contribution towards property's value
= $280,000 × 0.496 = $138,880

Tonto Company Purchased Property for $280,000