BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

Solutions

Chapter
Section
BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
28 views

Utica Corporation paid $360,000 to purchase land and a building. An appraisal showed that the land is worth $100,000 and the building is worth $300,000. What cost should Utica assign to the land and to the building, respectively?

To determine

Ascertain the cost assigned to the land and to the building.

Explanation

Determination of cost:

The procurement or acquisition cost of “property, plant and equipment” comprises of all costs that are required to obtain the benefits to be derived from the asset.

Cost assigned to land and building is computed as follows:

AssetAppraisal valueRelative fair value (a) ×Total  cost (b) =Allocated cost (c)=(a)×(b)
Land$100,000 (1) 25% $360,000  $90,000
Building$300,000 (2) 75% $360,000  $270,000
Total$400,000    $360,000

Table (1)

Working note:

(1) Calculate the percentage of relative fair value of land:

Percentage of relativefair value of land}

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the goal of materials handling?

Foundations of Business (MindTap Course List)

What are the key factors on which external financing depends, as indicated in the AFN equation?

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

LO3 Increases in owners equity are entered as credits.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)