Pioneer Corporation purchased for $450,000 land and a building that will be used in farming operations. The appraised value of the land is $100,000 and the appraised value of the building is $400,000. Required:1) What amount of the purchase price will be allocated to the land?2) What amount of the purchase price will be allocated to the building?
What will be an ideal response?
1) $90,000
2) $360,000
| ? | Appraised Value | % | |||
| Land | $ 100,000 | 20% | |||
| Building | 400,000 | 80% | |||
| Total | $ 500,000 | 100% | |||
| Allocation: | ? | ? | ? | ? | ? |
| Land | $ 450,000 | × | 20% | = | $ 90,000 |
| Building | $ 450,000 | × | 80% | = | $ 360,000 |
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