Pinewood Company purchased two buildings on four acres of land. The lump-sum pur
ID: 2466178 • Letter: P
Question
Pinewood Company purchased two buildings on four acres of land. The lump-sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the land.
Determine the initial valuation of the buildings and the land.
Land
Building A
Building B
Total
Pinewood Company purchased two buildings on four acres of land. The lump-sum purchase price was $900,000. According to independent appraisals, the fair values were $450,000 (building A) and $250,000 (building B) for the buildings and $300,000 for the land.
Explanation / Answer
the ratio of each asset to the fair value of all assets
450000+250000+300000=1000000
for Building A (450000/1000000)*900000= $405000
for Building B (250000/1000000)*900000= $225000
For land (300000/1000000)*900000=$270000
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total $900000