A vehicle and plot of land were purchased for $115 000. The fair value of the vehicle was $20 000,and the fair value of the land was $130 000 at the time of purchase. To the nearest dollar,what amount should be allocated to the vehicle?

Question

Quizplus · Accepted Answer

The allocation is based on the proportion of the fair value of each item to the total fair value. The total fair value is $150,000 ($20,000 for the vehicle + $130,000 for the land). The vehicle's proportion is $20,000 / $150,000 = 1/7.5. Applying this proportion to the purchase price, the vehicle's allocation is 1/7.5 * $115,000 = $15,333.33, rounded to the nearest dollar is $15,333.

A Vehicle and Plot of Land Were Purchased for $115