Land and a warehouse were acquired for $89,000,000. What amounts should be recorded in the accounting records for land and for the warehouse if an appraisal showed the estimated values to be $40,000,000 for the land and $70,000,000 for the warehouse?

Question

Quizplus · Accepted Answer

The total purchase price of $89,000,000 should be allocated based on the relative appraised values of the land and warehouse. The land's appraised value is 40% of the total appraised value ($40,000,000 / $110,000,000), and the warehouse's appraised value is 60% ($70,000,000 / $110,000,000). Therefore, the land should be recorded at $32,396,000 (40% of $89,000,000) and the warehouse at $56,604,000 (60% of $89,000,000).

Land and a Warehouse Were Acquired for $89,000,000