On June 30,2015 Howard Company acquired a 5-acre tract of land.On the tract was a warehouse that Howard intended to use as a distribution center.At the time of the purchase,the land had an assessed tax valuation of $2,250,000 and the building had an assessed tax value of $7,750,000.Howard paid $16,750,000 for the land and building.After the purchase the company paid $750,000 to have various modifications made to the building.
Required:
a.At what amount should Howard record the land and building?
b.For financial reporting purposes,why might the managers of Howard prefer to assign a larger portion of the $16,750,000 to the land rather than the building?

Question

Quizplus · Accepted Answer

The Answer of On June 30,2015 Howard Company acquired a 5-acre tract of land.On the tract was a warehouse that Howard intended to use as a distribution center.At the time of the purchase,the land had an assessed tax valuation of $2,250,000 and the building had an assessed tax value of $7,750,000.Howard paid $16,750,000 for the land and building.After the purchase the company paid $750,000 to have various modifications made to the building.
Required:
a.At what amount should Howard record the land and building?
b.For financial reporting purposes,why might the managers of Howard prefer to assign a larger portion of the $16,750,000 to the land rather than the building?

On June 30,2015 Howard Company Acquired a 5-Acre Tract of Land.On