Question

Riverboat Adventures pays $500,000 plus $13,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $78,000, a building appraised at $218,400, and paddleboats appraised at $223,600. Compute the cost that should be allocated to the building.

Answer 1

$215,460

Step-by-step explanation:

Apportion the total cost using the appraised values to determine the cost to be allocated to buildings.

Total cost include Purchase price plus closing costs. That is $513,000 ($500,000 + $13,000)

Cost allocated to building is $218,400 / $520,000 x $513,000 = $215,460