Question

Companies often face a basket purchase situation when they buy real estate, because the acquisition usually involves both the land that is purchased and the building that is located on the land. If you are the accounting manager, how would you go about allocating the real estate’s purchase price between the land and the building?
Why must you allocate the cost between these two assets? What incentives might you have to allocate a disproportionate amount to either the land or the building?


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  • CreatedJune 11, 2015
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