Question

Ivanhoe Co. purchased for $2,156,000 property that included both land and a building to be used in operations. The seller's book value was $294,000 for the land and $882,000 for the building. By appraisal, the fair value was estimated to be $490,000 for the land and $1,960,000 for the building. At what amount should Ivanhoe report the land and the building at the end of the year? (Round intermediate calculations to 5 decimal places, e.g. 1.25124 and final answers to O decimal places e.g. 58,971.) Cost allocated to land Cost allocated to building &

Answer 1

Answer

• Cost allocated to land = $ 431,200
• Cost allocated to Building = $ 1,724,800
• Working

Allocation of Total Cost	Appriased Value	% of total appraised value	Total cost of acquisition	Apportioned Cost
Land	$                           490,000.00	20.0%	$               2,156,000.00	$                                      431,200.00
Building	$                       1,960,000.00	80.0%	$               2,156,000.00	$                                  1,724,800.00
Total	$                       2,450,000.00	100%		$                                  2,156,000.00