Nobells Ltd purchased a property that included both land and a building for $570,000.The company hired an appraiser who has determined that the market value of the land is $380,000 and that of the building is $430,000.At what amount should the company record the cost of land?

Question

Quizplus · Accepted Answer

The cost of the land should be recorded based on its relative market value compared to the total market value of both assets. The total market value is $380,000 (land) + $430,000 (building) = $810,000. The proportion of the land's market value is $380,000 / $810,000. The cost allocated to the land is $570,000 * ($380,000 / $810,000) = $267,407.

Nobells Ltd Purchased a Property That Included Both Land and a Building