A building with an appraisal value of $154,000 is made available at an offer price of $172,000.The purchaser acquires the property for $40,000 in cash,a 90-day note payable for $45,000,and a mortgage amounting to $75,000.The cost basis recorded in the buyer's accounting records to recognize this purchase is
A)$160,000
B)$120,000
C)$172,000
D)$154,000

Question

Quizplus · Accepted Answer

To calculate the cost basis, we need to add up all the costs involved in the purchase:
Cash payment = $40,000
90-day note payable = $45,000
Mortgage = $75,000
Offer price = $172,000

Total cost = $40,000 + $45,000 + $75,000 + $172,000 = $332,000

However, we need to subtract the difference between the appraisal value and the offer price to account for the discount received by the buyer:
$172,000 - $154,000 = $18,000

Total cost - discount received = $332,000 - $18,000 = $314,000

Therefore, the cost basis recorded in the buyer's accounting records is $160,000 ($314,000 - $154,000).

A Building with an Appraisal Value of $154,000 Is Made