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 .

$140,000

Explanation:

Data given in the question

Lump sum value of land and building = $420,000

Fair market value of land = $160,000

Fair market value of building = $320,000

The computation of the cost assigned to the land is shown below:

= Lump sum cost of purchased land and building × fair market value of land ÷ total fair market value of land and building

= $420,000 × $160,000 ÷ ($160,000 + $320,000)

= $420,000 × $160,000 ÷ $480,000

= $140,000

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