Question

A company purchase land and building from the seller for $900,000 a separate appraisal retails the fair value of the land to be $200,000 and the fair value of the building to be 800,000 for what amount with the company record land at the time of purchase

Answer 1

Answer: $180,000

Explanation: According to GAAP, the land must be recorded using the Cost Model. They cannot be recorded using the Fair Value Model.

So, the amount to record the land is:

$200,000 x ($900,000/$1,000,000) = $180,000