Question

On April 1, Mooney Corporation purchased for $1620000 a tract of land on which a warehouse and office building was located. The following data were collected concerning the property:Current Valuation:Land: 60000Warehouse: 40000Building: 800000Vendor's Original Cost:Land: 550000Warehouse: 370000Building: 680000How would you find the appropriate costs for the Land?a) Use Current Valuation only (60000)b) Use Vendor's Original Cost only (550000)c) 60000-55000 = 5000d) (60/180)*1620000 = 540000

Answer 1

Answer:

d) (60/180)*1620000 = 540000

Explanation:

we will weight each assets market value and then apply it to the all-in-one purchase price:

Land:              600,000

Warehouse:   400,000

Building:         800,000

Total             1,800,000

Acquisition price 1,620,000

600,0000 / 1,800,000 = 1/3 weight of the land

1/3 x 1,620,000 = 540,000