Question

Question 3 of 30. Brenda purchased a business for $120,000 and received a building, FMV $80,000: land, FMN $10,000 and furniture fixtures, FMV $30,000. She spent $10,000 on legal fees to make the purchase. What is the basis of these me? $82,500 building: $12,500 land; $35,000 furniture and fixtures. $88,750 building: $11,250 land: $30,000 furniture and fixtures. $80,000 building: $10,000 land; $30,000 furniture and fixtures. $86,667 building: $10,833 land: $32,500 furniture and fixtures. Mark for follow up of the

Answer 1

Allocation of total cost Appraised value Building 80000 Land 10000 Furniture 30000 Total 120000 Brenda company Part 1 a - Allocation table (120000 + 10000 ) % of total appraised value Total cost of Acquisition Apportioned cost 0.666666667 130000 86666.66667 0.083333333 130000 10833.33333 0.25 130000 32500 130000 Option 4 is correct. Explanation Whenever a lumpsum amount is paid for various purchases and we are provided with the appraised value of those purchases then it is necessary to find the relative percentage of the appraised value and allocate the lump sum amount according to that percentage to various purchases to find the cost of acquisition of each individual item.