Question

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $1,900,000. Harding paid $525,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $555,000; Building, $1,650,000 and Equipment, $1,095,000. (Round percentages to two decimal places: ie .054 = 5%).

Answer 1

Answer: C. 950,000

Explanation:

First we will calculate the Total Appraisal Value of the Property,

Total Appraisal value of Property = Land+Building+Equipment

=$555,000+$1,650,000+$1,095,000

= $3,300,000

Now that we have the Total Appraisal Value we can apportion original cost based on the proportion of the Property that the Building was Appraised at,

Cost of Property = $1,900,000

Proportion of Building in Appraised value is = 1,650,000/3,300,000

Value to be recorded for Building will therefore be,

=$1,900,000($1,650,000/$3,300,000)

= $950,000

$950,000 will be recorded as the cost of the Building.