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10 September, 01:01

Red Rock Bakery purchases land, building, and equipment for a single purchase price of $260,000. However, the estimated fair values of the land, building, and equipment are $126,000, $198,000, and $36,000, respectively, for a total estimated fair value of $360,000. Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.

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  1. 10 September, 01:10
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    Land ($91,000), building ($143,000) and equipment ($26,000)

    Explanation:

    We can allocate the fair values as follows:

    Particulars Fair value Allocated amount

    (a) (b) = (a) / Total*$260,000

    Land $126,000 $91,000

    Building 198,000 143,000

    Equipment 36,000 26,000

    Total $360,000 $260,000

    The amount that the company would record for the individual asset is as provided above.
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