Burchell Company purchased land and a building for a lump sum cost of $420,000. The land has a fair market value of $160,000 and the building has a fair market value of $320,000. The cost assigned to the land is

Question

Brenden Wagner

Business

18 December, 09:57

Burchell Company purchased land and a building for a lump sum cost of $420,000. The land has a fair market value of $160,000 and the building has a fair market value of $320,000. The cost assigned to the land is

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Answers (1)

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Aubree · Answer 1

Land cost would be : $100,000

Explanation:

From the given information, 160000+320000 = 480,000. This is contrary to the initial purchase value if $420,000.

Therefore the have been a revaluation (according to the question). Accounting standards states that revaluation surplus should not be capitalized but rathe taken to the statement of other comprhensive income

From the question; $480000 - $420000 = $60,000

if building is $320,000,

Land will be ($160000-$60000) = $100000