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7 November, 14:39

simpson and homer corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely equipped. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and equipment, respectively. At what amount would the company record the building

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  1. 7 November, 15:04
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    The amount that the company would record for building would be $1,200,000.

    Explanation:

    We can allocate the fair values as follows:

    Particulars Fair value Allocated amount

    (a) (b) = (a) / Total*$2.4m

    Building $1,300,000 $1,200,000

    Land $780,000 720,000

    Equipment $520,000 480,000

    Total $2,600,000 $2,400,000

    The amount that the company would record for building would be $1,200,000.
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