Castille Corp. purchases, for $600,000, land upon which a building and a dilapidated shed are situated. Castille plans to use the building as-is for operations but immediately razes the shed at a cost of $5,000 minus scrap recovery of $1,000. A recent tax appraisal of the property allocated $100,000 to the land and $400,000 to the building. In the entry to record the acquisition of the property,

at what amount will Castille debit Land?

a. $124,000

b. $120,800

c. $120,000

d. $100,000

Question

Alaina Carlson

Business

11 June, 22:19

Castille Corp. purchases, for $600,000, land upon which a building and a dilapidated shed are situated. Castille plans to use the building as-is for operations but immediately razes the shed at a cost of $5,000 minus scrap recovery of $1,000. A recent tax appraisal of the property allocated $100,000 to the land and $400,000 to the building. In the entry to record the acquisition of the property,

at what amount will Castille debit Land?

a. $124,000

b. $120,800

c. $120,000

d. $100,000

+5

Answers (1)

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Ansley Morrow · Answer 1

b. $120,800.00

Explanation:

Cost of the land $ 600,000/-

Associated expenses:

Razing down the shed: $ 5000

income from scrap: $ 1000

Total expenses $ 4000

The total cost of land = 600,000+4000 = $ 604,000

Tax allocation: land and building $ 500,000

land allocation will be: 100,000/500,000 x$ 604,000

=0.2x604,000

=$120,800.00