Land and a warehouse were acquired for $890,000. What amounts should be recorded in the accounting records for land and for the warehouse if an appraisal showed the estimated values to be $400,000 for the land and $700,000 for the warehouse?
A) $400,000 for land; $490,000 for warehouse.
B) $323,960 for land; $566,040 for warehouse.
C) $400,000 for land; $700,000 for warehouse.
D) $190,000 for land; $700,000 for warehouse.

Question

Quizplus · Accepted Answer

The values recorded in the accounting records should be based on the appraised values, which are $400,000 for the land and $700,000 for the warehouse. Therefore, the recorded value of the land should be $400,000 and the recorded value of the warehouse should be $700,000 - $400,000 = $300,000. The total recorded value would be $400,000 + $300,000 = $700,000. Therefore, the best choice is B, which is closest to the total recorded value of $700,000.

Land and a Warehouse Were Acquired for $890,000