Tomassi Company paid $450,000 to acquire a piece of real estate consisting of la
ID: 1178853 • Letter: T
Question
Tomassi Company paid $450,000 to acquire a piece of real estate consisting of land and an office building with a parking lot. In this situation:
A. The purchase price should be apportioned among the Land, Land Improvement, and Building accounts.
B. The entire purchase price should be debited to the Plant and Equipment account.
C. Land, Land Improvement, and Building accounts should each be debited for the respective appraisal value of each item.
D. Allocation of the entire $450,000 to Land results in an understatement of net income in the current and future accounting periods.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
Explanation / Answer
A. The purchase price should be apportioned among the Land, Land Improvement, and Building accounts.