Answer:
The answer is option (b). $250,000
Explanation:
Step 1: Determine total market value
The expression for the total market value is;
Total market value=land value+building value+equipment value
where;
land value=$300,00
building value=$600,000
equipment value=$300,000
replacing;
Total market value=(300,000+600,000+300,000)=$1,200,000
Total market value=$1,200,000
Step 2: Determine fraction of the total market value that is equipment
Equipment fraction=equipment value/total market value
where;
equipment value=$300,000
total market value=$1,200,000
replacing;
Equipment fraction=300,000/1,200,000=0.25
Step 3: Determine cost assigned to the equipment
Cost assigned to the equipment=equipment fraction×lump sum
where;
equipment fraction=0.25
lump sum=$1,000,000
replacing;
Cost assigned to the equipment=(0.25×1,000,000)=250,000
Cost assigned to the equipment=$250,000
