Question

Tonto Company purchased property for $280,000. The property included a building, equipment and land. The building was appraised at $173,600, the land at $126,000, and the equipment at $50,400. What is the amount of cost to be allocated to the building in the accounting records?

Answer 1

Answer:

$138,880

Explanation:

Property cost = $280,000

Appraised cost of the composite elements of the property

Building = $173,600

Land = $126,000

Equipment = $50,400

Total appraised cost of the property = 173600 + 126000 + 50400

                                                             = $350,000

Allocated cost of the elements

Allocated cost of building = $\frac{173600}{350000} * 280000$

                                           = $138,880

Allocated cost of land =$\frac{126000}{350000} * 280000$

                                    = $100,800

Allocated cost of equipment = $\frac{50400}{350000} * 280000$

                                                = $40,320

Cost allocated to building = $138,880