Riverboat Adventures pays $310,000 plus $15,000 in closing costs to buy out a competitor.The real estate consists of land appraised at $35,000,a building appraised at $105,000,and paddleboats appraised at $210,000.Compute the cost that should be allocated to the land.
A)$93,000.
B)$140,000.
C)$32,500.
D)$31,000.
E)$97,500.

Question

Quizplus · Accepted Answer

We can allocate the cost based on the appraised values of the assets:
Total appraised value = $35,000 + $105,000 + $210,000 = $350,000

We can find the percentage of the total value that the land represents:
Land percentage = $35,000/$350,000 = 0.1

Then we can apply that percentage to the total cost to find the cost allocated to the land:
Land cost = 0.1 x ($310,000 + $15,000) = $32,500

Therefore, the cost that should be allocated to the land is $32,500, which is choice C.

Riverboat Adventures Pays $310,000 Plus $15,000 in Closing Costs to Buy