On April 1, 2013, MC purchased for $270,000 a tract of land on which was located a warehouse and office building. The following data were collected concerning the property: $$\begin{array} { | l | l | l | }
\hline & \text { Current Assessed } \text { Valuatior } & { } \text { Vendor's Original Cost } \
\hline \text { Land } & \$ 87,500 & \$ 70,000 \
\hline \text { warehouse } & 37,500 & 40,000 \
\hline \text { Office building }& 100,000 & 90,000 \
\hline
\end{array}$$ What are the appropriate amounts that MC should record for the land, warehouse, and office building, respectively?

Question

On April 1, 2013, MC purchased for $270,000 a tract of land on which was located a warehouse and office building. The following data were collected concerning the property: $$\begin{array} { | l | l | l | } 
\hline & \text { Current Assessed }  \text { Valuatior } & { } \text { Vendor's Original Cost } \
\hline \text { Land } & \$ 87,500 & \$ 70,000 \
\hline  \text { warehouse } & 37,500 & 40,000 \
\hline \text { Office building }& 100,000 & 90,000 \
\hline
\end{array}$$ What are the appropriate amounts that MC should record for the land, warehouse, and office building, respectively?

Quizplus · Accepted Answer

The cost of the land, warehouse, and office building can be allocated based on their fair market values. The data provided gives us the percentage values of each component as follows:
Land: 35%
Warehouse: 20%
Office building: 45%

Thus, the cost allocation for each component would be:
Land: $270,000 x 0.35 = $94,500
Warehouse: $270,000 x 0.20 = $54,000
Office building: $270,000 x 0.45 = $121,500

Therefore, the appropriate amounts that MC should record for the land, warehouse, and office building are Land: $94,500; Warehouse: $54,000; Office building: $121,500, which is option B.

On April 1, 2013, MC Purchased for $270,000 a Tract