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Best Beauty Salon purchased land and a building for $7,000,000 on 1/1
Best Beauty Salon purchased land and a building for $7,000,000 on 1/1. The estimated fair market values of the land and building are $2,000,000 and $8,000,000, respectively. What amount should be recorded in the building account on 1/1? Fill in the blank with your calculated number. DO NOT include commas, $ signs, period, decimal points, etc., just enter the raw number. Webcourses will add commas to your answer automatically. For example, if you calculated the answer to be $24,123, you would only input: 24123
Expert Solution
This calculation requires three step process.
Step 1: Calculate Lumpsum amount at market value.
Market Value of Land = $2,000,000
Market Value of Building = $ 8,000,000
Total Market Value of Purchased Assets = $10,000,000.
Step 2: Calculate Percentage
Land = 2,000,000 / 10,000,000 = 20%
Building = 8,000,000 / 10,000,000 = 80%
Step 3: Attribute to Purchase Cost:
Land = 20% x $7,000,000 = $1,400,000
Building = 80% x $7,000,000 = $ 5,600,000
Question: What amount should be recorded in the building account on 1/1.
Answer: $ 5,600,000.
Answer to enter: 5600000
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