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elena-s [515]
3 years ago
13

Riverboat Adventures pays $450,000 plus $5,000 in closing costs to buy out a competitor. The real estate consists of land apprai

sed at $67,200, a building appraised at $158,400, and paddleboats appraised at $254,400. Compute the cost that should be allocated to the building.
Business
1 answer:
kkurt [141]3 years ago
8 0

Answer:

$150,150

Explanation:

Total fair value of all assets:

= Land + Building + Paddleboats

= $67,200 + $158,400 + $254,400

= $480,000

Building accounted for:

= Fair value of building ÷ Total fair value

= $158,400 ÷ $480,000

= 33%

Therefore, the building is 33% of the total fair value of assets.

Cost of acquisition of assets:

= Amount paid + Closing cost to buy out a competitor

= 450,000 + 5,000

= $455,000

Cost to be allocated to the building:

= Cost of acquisition of assets × Percent share in total fair value

= $455,000 × 33%

= $150,150

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