Question

Crow Co. purchased some of the machinery of Hare Inc., a bankrupt competitor, at a liquidation sale for a total cost of $17,000. Crow’s cost of moving and installing the machinery totaled $1,800. The following data are available: Item Hare’s Net Book Value on the Date of Sale List Price of Same Item If New Appraiser’s Estimate of Fair Value Punch press $ 10,140 $ 19,000 $ 15,000 Lathe 8,740 9,000 5,000 Welder 2,730 6,000 3,060 Required: a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. (Do not round intermediate calculations.)

Answer 1

Answer:

Punch Press     12,228.97

Lather                 4,076.32

Welder                2,494.71

Explanation:

We use the fair value of the acquired goods and then compare with the cost:

Punch press fair value 15,000

Lather fair value             5,000

Welder fair value           3,060

Total                            23,060

All the Cost incurred to get the equipment read y for use:

17,000 purhcase  + 1,800 installation: 18,800

we now cross multiply for each product:

15,000/23,060 x 18,800  =   12.228,9679

 5,000/23,060 x 18,800  =  4.076,32263

 3,060/23,060 x 18,800  =  2.494,7094

Punch Press     12,228.97 debit

Lather                 4,076.32 debit

Welder                2,494.71 debit

                Cash                 18,800 credit