Kenyon Company purchased land and a building for $270,000.The appraised values of the land and building were $100,000 and $200,000,respectively.The purchase price allocated to the building should be:

Question

Quizplus · Accepted Answer

The purchase price should be allocated based on the appraised values. The total appraised value is $300,000 ($100,000 for land + $200,000 for building). The building's appraised value represents 2/3 of the total appraised value ($200,000 out of $300,000). Therefore, 2/3 of the purchase price ($270,000) should be allocated to the building, which is $180,000 (2/3 of $270,000).

Kenyon Company Purchased Land and a Building for $270,000