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Westerfield Company purchased a mall in San Diego downtown where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are
Westerfield Company purchased a mall in San Diego downtown where land values are rapidly increasing. Gerald Carter, controller, and Wilma Ankara, financial vice president, are trying to allocate the cost of the purchase between the land and the building. Carter favors placing a very high proportion of the cost on the building itself. Ankara, his supervisor, argues that the allocation should recognize the increasing value of the land and assign more values to the land.
- Why does Mr. Carter suggest to allocate a significant portion of the purchase cost to the building? What are the advantages and disadvantages of this suggestion.
- Why does Ankara insist to allocate more cost to the land than to the building?
- Which one do you prefer? Why? Are there any ethical issues you might face?
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