A company paid $326,000 for property that included land, land improvements, and a building. The land was appraised at $175,000, the land improvements were appraised at $70,000, and the building was appraised at $105,000. What is the allocation of costs to the three assets? a. Land, $150,000; Land Improvements, $60,000; Building, $90,000 b. Land, $163,000; Land Improvements, $65,200; Building, $97,800 c. Land, $150,000; Land Improvements, $61,600; Building, $92,400 d. Land, $159,000; Land Improvements, $65,200; Building, $95,400 e. Land, $175,000; Land Improvements, $70,000; Building, $105,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A company paid $326,000 for property that included land,
land improvements, and a building. The land was appraised
at $175,000, the land improvements were appraised at
$70,000, and the building was appraised at $105,000. What
is the allocation of costs to the three assets?
a. Land, $150,000; Land Improvements, $60,000; Building,
$90,000
b. Land, $163,000; Land Improvements, $65,200; Building,
$97,800
c. Land, $150,000; Land Improvements, $61,600; Building,
$92,400
d. Land, $159,000; Land Improvements, $65,200; Building,
$95,400
e. Land, $175,000; Land Improvements, $70,000; Building,
$105,000
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