Question

33. A company paid $125,000, plus a 9% commission and $7,000 in closing costs for a property. The property included land appraised at $85,000, land improvements appraised at $34,000, and a building appraised at $51,000. What should be the allocation of this property's costs in the company's accounting records?

a. Land $28,650; Land Improvements, $42,975; Building, $71,625

b. Land $85,000; Land Improvements; $34,000; Building; $51,000

c. Land $25,000; Land Improvements, $37,500; Building, $62,500

d. Land $71,625; Land Improvements, $28,650; Building, $42,975

e. Land $62,500; Land Improvements, $25,000; Building, $37,500

Answer 1

Answer

• Workings

Note: Total Cost of acquisition = $125000 + (125000 x 9%) + 7000
= $ 143,250

Allocation of Total Cost	Appraised Value	% of total appraised value	Total cost of acquisition	Apportioned Cost = Answer
Land	$                             85,000.00	50.0%	$                   143,250.00	$                                        71,625.00
Land Improvement	$                             34,000.00	20.0%	$                   143,250.00	$                                        28,650.00
Building	$                             51,000.00	30.0%	$                   143,250.00	$                                        42,975.00
Total	$                           170,000.00	100%		$                                      143,250.00

--Cost allocated

Land	$               71,625.00
Land Improvement	$               28,650.00
Building	$               42,975.00

• Correct Answer = Option ‘D’ Land $71,625; Land Improvements, $28,650; Building, $42,975