Benton Corporation acquired real estate that contained land, building and equipment. The property cost Benton $825,000. Benton paid $175,000 in cash and issued a Note Payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $85,000; Building, $625,000; and Equipment, $250,000.
What value will be recorded for the building?

Question

Quizplus · Accepted Answer

The value recorded for the building is based on the proportion of its appraised value to the total appraised value of all assets. The total appraised value is $960,000 ($85,000 + $625,000 + $250,000). The building's appraised value is $625,000. The proportion is $625,000 / $960,000. Multiply this proportion by the total cost of $825,000 to get the recorded value for the building: $625,000 / $960,000 * $825,000 = $537,109.

Benton Corporation Acquired Real Estate That Contained Land, Building and Equipment