Fox Realty purchased a residential property for $1,500,000. The latest available real estate assessment valued the...

Fox Realty purchased a residential property for $1,500,000. The latest available real estate assessment valued the property at $1,750,000 of which 20% was allocated to the land. How should record this acquisition on its books?

Expert Solution

Total value of land and building valued = $1,750,000

Value of land = 1,750,000 * 20% = $350,000

Value of Building = $1,400,000

Computation of allocation of cost in books

Cost of land = 1,500,000 * (350,000 / 1,750,000)

= $300,000

Cost of Building = 1,500,000 *(1,400,000 / 1,750,000)

= $1,200,000

In the books it is recorded as land as $300,000 and building as $1,200,000

ekkarill92 answered 2 years ago

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