A company paid $150,000, plus a 6% commission and $4,000 in closing costs for a property. The property included land appraised at $87,500, land improvements appraised at $35,000, and a building appraised at $52,500. What should be the allocation of this property's costs in the company's accounting records?Select one:a. Land $75,000; Land Improvements, $30,000; Building, $45,000.b. Land $75,000; Land Improvements, $30,800; Building, $46,200.c. Land $81,500; Land Improvements, $32,600; Building, $48,900.d. Land $79,500; Land Improvements, $32,600; Building, $47,700.e. Land $87,500; Land Improvements; $35,000; Building; $52,500.

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andromache andromache · Answer 1 · 2019-09-18T12:04:42+02:00

Answer:

c. Land $81,500; Land Improvements, $32,600; Building, $48,900.

Explanation:

For computing the allocation of all property, we need to follow the steps which is described below:

Step 1: Find out the total value of all properties

Step 2: Weighted of each property to the total amount of properties

Step 3: Find out the total amount which is to be paid

Step 4: Multiply step 3 by step 2

So,

The total value of all properties equals to

= Land appraised cost + land improvement appraised cost + building appraised cost

= $87,500 + $35,000 + $52,500

= $175,000

Now weightage for each property

For land appraised = $87,500 ÷ $175,000 = 0.50

For land improvement = $35,000 ÷ $175,000 = 0.20

For building appraised = $52,500 ÷ $175,000 = 0.30

The total amount which is to be paid equals to

= Paid amount + paid amount × commission + closing cost for a property

= $150,000 + $150,000 × 0.06 + $4,000

= $150,000 + $9,000 + $4,000

= $163,000

Now,

For Land appraised = $163,000 × 50% = $81,500

For land improvement = $163,000 × 20% = $32,600

For building appraised = $163,000 × 30% = $48,900