Riverboat Adventures pays $520,000 plus $18,000 in closing costs to buy out a competitor. The real estate consists of land appraised at $82,500, a building appraised at $214,500, and paddle boats appraised at $253,000. Compute the cost that should be allocated to the building.

$209820

Explanation:

Given: Riverboat adventure pays= $520000.

           Closing cost to buy out competitor= $18000.

           Land appraised= $82500.

           Building appraised= $214500.

            Paddle boat appraised= $253000.

This is a case of lump sum purchase.

First finding the price paid of real estate.

Price paid for real estate=

∴ Price paid for real estate=

Now, calculating cost allocated to building.

Total appraised value=

⇒ Total appraised value=

∴ Total appraised value=

Cost allocated to building=

⇒ Cost allocated to building=

⇒  Cost allocated to building=

∴ Cost allocated to building=

Hence, the cost that should be allocated to the building is $209820.

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