Question

A building with an appraisal value of $154,000 is made available at an offer price of $172,000. The purchaser acquires the property for $40,000 in cash, a 90-day note payable for $45,000, and a mortgage amounting to $75,000. The cost basis recorded in the buyer's accounting records to recognize this purchase is

Answer 1

Answer:

$160,000

Explanation:

The cost that must be recognized in line with cost basis of recording non-current assets is the amount of money or monetary value of whatever an entity exchanged for the acquisition of a non-current asset. The value exchanged for the acquisition of non-current asset comprises of purchase price plus the import duty paid and any other cost incurred in bringing the asset to the location and the condition required for the asset to be useful to the enterprise.

In this question, the actual payment made, and liability incurred to acquire the building are as follows:

Cash payment                $40,000

90-day note payable     $45,000  

Mortgage                       $75,000        

COST RECORDED        $160,000