Question

On April 1, Sheffield Corp. purchased for $1647000 a tract of land on which a warehouse and office building was located. The following data were collected concerning the property: Current Assessed Valuation Vendor's Original Cost Land $580000 $530000 Warehouse 410000 380000 Office building 810000 680000 $1800000 $1590000 What are the appropriate amounts that Sheffield should record for the land, warehouse, and office building, respectively

Answer 1

Answer:

The appropriate amounts that Sheffield should record for the land, warehouse, and office building, respectively are given as follows:

Land = $530,700

Warehouse = $375,150

Office building = $741,1500

Explanation:

Note: The data in this question are merged together. They therefore sorted before answering the question as follows:

                     Current Assessed Valuation             Vendor's Original Cost

Land                             $580000                                      $530000

Warehouse                     410000                                        380000

Office building                810000                                       680000

                                   $1800000                                    $1590000

The explanation of the answer is now given as follows:

The appropriate amounts can be determined based on the  Current Assessed Valuation by using the following formula:

Asset amount = (Current Assessed Valuation of the asset / Total Current Assessed Valuation of all the assets) * Purchase price of the tract of land ........................ (1)

Using equation (1), we therefore have:

Land = ($580000 / $1800000) * $1647000 = $530,700

Warehouse = ($410000 / $1800000) * $1647000 = $375,150

Office building = ($810000 / $1800000) * $1647000 = $741,1500

Therefore, the appropriate amounts that Sheffield should record for the land, warehouse, and office building, respectively are given as follows:

Land = $530,700

Warehouse = $375,150

Office building = $741,1500