A company purchased property for a building site. The costs associated with the property were: What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?
A) $175,800 to Land; $18,800 to Building.
B) $190,000 to Land; $3,800 to Building.
C) $190,800 to Land; $1,000 to Building.
D) $192,800 to Land; $0 to Building.
E) $193,800 to Land; $0 to Building.

Question

Quizplus · Accepted Answer

All costs associated with preparing the land for its intended use, such as purchase price, legal fees, and site preparation, should be allocated to the land. Since the costs are not specified, the assumption is that all costs are related to land preparation, hence $193,800 to Land and $0 to Building.

A Company Purchased Property for a Building Site