Land and a building on the land are purchased for $1,296,000.The appraised values of the land and building are $340,000 and $1,020,000,respectively.The cost allocated to the land should be

Question

Quizplus · Accepted Answer

The cost allocated to the land can be found by subtracting the appraised value of the building from the total cost of the land and building. 
Cost allocated to land = Total cost - Appraised value of building 
Cost allocated to land = $1,296,000 - $1,020,000 
Cost allocated to land = $276,000

Therefore, the cost allocated to the land should be $324,000 ($340,000 - $16,000, which is 5% of $340,000 that represents the cost of the land).

Land and a Building on the Land Are Purchased for $1,296,000.The