Question

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

Answer 1

Answer:

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.