Abbott Industries Bought a Property with Land and a Building

question 36

Multiple Choice

Abbott Industries bought a property with land and a building on it for $20,000,000.An independent appraisal of the land put the value of the land between $5,000,000 and $8,000,000.If Abbott's financial reporting objective is to minimize taxes how should the cost be allocated to the two assets? $\begin{array}{ll}&\text {Land }&\text {Building }\\\hline\text { A) } &\$ 5,000,000 & \$ 15,000,000 \\\text { B) } &\$ 6,500,000 & \$ 13,500,000 \\\text { C) } &\$ 8,000,000 & \$ 12,000,000 \\\text { D) }& \$ 10,000,000 & \$ 10,000,000\end{array}$

• A)Option A
• B)Option B
• C)Option C
• D)Option D

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Definitions:

Financial Reporting

Generating documents that expose the economic health of an organization to its leadership, stakeholders, and government agencies.

Rules-Based

A regulatory or decision-making approach that relies strictly on written rules, standards, and procedures.

Loopholes

Provisions in laws or regulations that allow individuals or companies to avoid abiding by the spirit of the law in a legal way.

Economic Performance Philosophy

An approach focusing on achieving long-term economic goals such as sustainability, growth, and efficient resource allocation.