A company purchased property for $100,000. The property included a building, a parking lot, and land. The building was appraised
at $62,000; the land at $35,000, and the parking lot at $18,000. Land should be recorded in the accounting records with an allocated cost of:________.a) $0.b) $30,435.c) $35,000.d) $46,087.e) $100,000.
In accounting, property acquisition cost of a group of assets is allocated based on the ratio of the appraisal value of each asset to the sum of the appraisal values of all the assets concerned.
The following are given in the question:
Property acquisition cost = $100,000
Building appraisal value = $62,000
Land appraisal value = $35,000
Parking lot appraisal value = $18,000
Therefore, we have:
Total appraisal value = Building appraisal value + Land appraisal value + Parking lot appraisal value = $62,000 + $35,000 + $18,000 = $115,000
Cost allocated to land = (Land appraisal value / Total appraisal value) * Property acquisition cost = ($35,000 / $115,000) * $100,000 = 0.304347826086957 * $100,000 = $30,435
Therefore, Land should be recorded in the accounting records with an allocated cost of $30,435.
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