Question

Carver Inc. purchased a building and the land on which the building is situated for a total cost of $859700 cash. The land was appraised at $168,071 and the building at $820,584. Required b. Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the building c. Would the company recognize a gain on the purchase? d. Record the purchase in a horizontal statements model. Complete this question by entering your answers in the tabs below. Required B Required C Required D Determine the amount of the purchase cost to allocate to the land and the amount to allocate to the buildir intermediate calculations to 2 decimal places and final answers to the nearest whole dollar amount Allocated Cost Required C >

Answer 1

Required B :  

	Allocated Cost
Land	146,149
Building	713,551
Total	859,700

Calculation

	Total Appraised Value	% of Appraisal Value	Purchase Price	Allocated Cost
Land	168,071	0.17	859,700	146,149
Building	820,584	0.83	859,700	713,551
Total	988,655			859,700

[% of appraised value is (land = 168,071/988,655 = 0.17)  (building = 820,584/988,655 = 0.83]

Required C : No

Reason : In the historical cost concept, the assets needs to be recorded at the amount paid for them.

Required D :

Balance Sheet

Income Statement

Stetement of Cash Flows

Assets

Liabilities

Equity

Revenue

Expense

Net Income

Cash

+

Land

+

Building

=

+

-

=

(859,700)

146,149

713,551

(859,700)

IA