Question

Tonto Company purchased property for $140,000. The property included a building, equipment and land. The building was appraised at $98,000, the land at $63,000, and the equipment at $36,000. What is the amount of cost to be allocated to the building in the accounting records?

Answer 1

Amount of cost to the building is $69,645

Explanation:

The total property value of Tonto Company = $140,000.

The total property (building, equipment and land) value of Tonto Company = $140,000.

The building was appraised at $98,000,  

The land was appraised at $63,000  

The equipment was appraised at $36,000.

• The total current value of the 3 assets = $98,000 + $63,000 + $36,000
• The total current value of the 3 assets = $197,000.

• Amount of cost to the building = ($98,000 x $140,000) / $197,000.
• Amount of cost to the building = $69,644.67

Amount of cost to the building = $69,645