Question

Chico Company paid $560,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture, $140,000; Building, $460,000, and Land, $110,000. Based on this information, what is the cost that should be allocated to the office furniture? (Round your intermediate percentages to four decimal places: ie .054231 = 5.42%.)

Answer 1

Answer: $110,432

Explanation:

The cost allocated to the Office furniture is the percentage of total appraised cost * the price paid for the basket purchase because it shows what proportion of the Basket Purchase should be ascribed to the Office furniture.

Total Appraised value = 140,000 + 460,000 + 110,000

= $710,000

Office furniture Proportion = 140,000/710,000

= 0.1971830985

=0.1972

Amount to be allocated to Office furniture = 0.1972 * 560,000

= $110,432

$110,432 should be allocated to the office furniture.

= $110,422.