A land developer purchased some farmland to build a suburb. The full cost was $2,000,000 and the package was appraised as follows: land: $1,200,000; buildings, $900,000; land improvements, $300,000. In addition, the developer spent $550,000 installing utilities, $1,300,000 preparing the streets and $300,000 building a parking lot. The developer received $100,000 when the topsoil was sold. What amount should be recorded in the Land Improvements account?
A land developer purchased some farmland to build a suburb. The full cost was $2,000,000 and the package was appraised as follows: land: $1,200,000; buildings, $900,000; land improvements, $300,000. In addition, the developer spent $550,000 installing utilities, $1,300,000 preparing the streets and $300,000 building a parking lot. The developer received $100,000 when the topsoil was sold. What amount should be recorded in the Land Improvements account?
A)$250,000
B)$2,300,000
C)$600,000
D) $2,400,000
Please explain how and why to calculate impairment, I have tried and used the formula : (Fair Value/Total Fair Value) x purchase price - amount recoverable.
This was my calculation but it is incorrect (300000/2450000) x 2000000 - 100000 = 1448980
Please provide the correct formula and how to know where to input each number !
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