Question

Red Rock Bakery purchases land, building, and equipment for a single purchase price of $200,000. However, the estimated fair values of the land, building, and equipment are $105,000, $180,000, and $15,000, respectively, for a total estimated fair value of $300,000.

Answer 1

Answer:

The amounts to be recorded land, building, and equipment are $70,000, $120,000, and $10,000, respectively.

Explanation:

Purchase price of land, building, and equipment = $200,000

Estimated fair values of;

Land = $105,000

Building = $180,000

Equipment = $15,000

Total estimated fair value = $300,000

Amount to be recorded in the books of Red Rock Bakery for;

Land = ($105,000/$300,000) × $200,000

        = $70,000

Building = ($180,000/$300,000) × $200,000

        = $120,000

Equipment = ($15,000/$300,000) × $200,000

        = $10,000

The amounts to be recorded land, building, and equipment are $70,000, $120,000, and $10,000, respectively.