Question

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,660,000....

Harding Corporation acquired real estate that contained land, building and equipment. The property cost Harding $2,660,000. Harding paid $805,000 and issued a note payable for the remainder of the cost. An appraisal of the property reported the following values: Land, $706,440; Building, $2,674,560 and Equipment, $798,000.

What value will be recorded for the building?

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Answer #1

The value of building is $950,000

Explanation:

The real estate basis of $2660000 can be apportioned between the three assets on the basis of their appraised values as computed below:

The applicable formula=real estate basis*asset appraised value/total appraised values

Total appraised values=$706440+$2674560+$798000=$4179000

real estate cost is $2660000

land cost =$2660000*$706,440/$4179,000

=$449660

building cost =$2660,000*$2674560/$4179,000

=$1702,400

equipment cost =$2660,000*$798,000/$4179,000

=$507940

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