Question

Ayayai Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $466,200. The estimated fair values of the assets are land $88,800, building $325,600, and equipment $118,400. At what amounts should each of the three assets be recorded

Answer 1

Answer:

The recorded value of land, building, and the equipment is $77,700,  $284,900, and $103,600 respectively.

Explanation:

The steps to compute the recorded amount is shown below:

1. First compute the total fair value of the assets:

= land + building + equipment

= $88,800 + $325,600 + $118,400

= $532,800

2. Now the recorded amount will be equal to

For land = (Fair value of land ÷  total fair value of the assets) × total payment made

=  ($88,800 ÷ $532,800) × $466,200

= $77,700

For building = (Fair value of building ÷  total fair value of the assets) × total payment made

=  ($325,600 ÷ $532,800) × $466,200

= $284,900

For equipment = (Fair value of equipment ÷  total fair value of the assets) × total payment made

=  ($118,400 ÷ $532,800) × $466,200

= $103,600