Allocation of Package Purchase Price Tamarack Company purchased a plant from one of its suppliers. The $1,000,000 purchase price included the land, a building, and factory machinery. Tamarack also paid $6,000 in legal fees to negotiate the purchase of the plant. An appraisal showed the following values for the items purchased: Property Assessed Value Land $126,000 Building $456,000 Machinery $318,000 TOTAL $900,000 Using the assessed value as a guide, allocate the total purchase price of the plant to the land, building, and machinery accounts in Tamarack company's records.

The total purchase price of the plant allocated to the land, building, and machinery is $140,840, $509,707 and $355,453 respectively

Explanation:

The computation is shown below:

For land

= Total purchase price * appraisal value of land : total appraisal value

= $1,006,000 * $126,000 : $900,000

= $140,840

For building

= Total purchase price * appraisal value of building : total appraisal value

= $1,006,000 * $456,000 : $900,000

= $509,707

For machinery

= Total purchase price * appraisal value of land : total appraisal value

= $1,006,000 * $318,000 : $900,000

= $355,453

where, the total purchase price is

= $1,000,000 + $6,000

= $1,006,000