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27 April, 05:22

Burchell Company purchased land and a building for a lump sum cost of $420,000. The land has a fair market value of $160,000 and the building has a fair market value of $320,000. The cost assigned to the land is

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  1. 27 April, 05:45
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    Land cost would be : $100,000

    Explanation:

    From the given information, 160000+320000 = 480,000. This is contrary to the initial purchase value if $420,000.

    Therefore the have been a revaluation (according to the question). Accounting standards states that revaluation surplus should not be capitalized but rathe taken to the statement of other comprhensive income

    From the question; $480000 - $420000 = $60,000

    if building is $320,000,

    Land will be ($160000-$60000) = $100000
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