Answer:
The amount that should be recorded in the separate account for the land=$400,000
Explanation:
Step 1: Determine total fair value
The expression for the total fair value is;
Total fair value=land value+building value+equipment value
where;
land value=$500,00
building value=$800,000
equipment value=$200,000
replacing;
Total fair value=(500,000+800,000+200,000)=$1,500,000
Total fair value=$1,500,000
Step 2: Determine proportion of the total fair value that is land
land proportion=land value/total fair value
where;
land value=$500,000
total market value=$1,500,000
replacing;
land proportion=500,000/1,500,000=1/3
Step 3: Determine cost assigned to the land
Cost assigned to the land=land proportion×lump sum
where;
land proportion=1/3
lump sum=$1,200,000
replacing;
Cost assigned to the land=(1/3)×1,200,000=400,000
Cost assigned to the land=$400,000
The amount that should be recorded in the separate account for the land=$400,000
