Question

Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,500,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,800,000, $3,600,000, and $3,600,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be: Building Land Equipment a. $ 4,800,000 $ 3,600,000 $ 3,600,000 b. $ 4,800,000 $ 3,600,000 $ 600,000 c. $ 3,400,000 $ 2,550,000 $ 2,550,000 d. None of these answer choices are correct.

Answer 1

Answer:

C.$3,400,000; $2,550,000; $2,550,000

Explanation:

Calculation to determine what The initial values of the building, land, and equipment would be

First step is to calculate the formula Total fair value using this formula

Total fair value = Building + Land + Equipment

Let plug in the formula

Total fair value = $4,800,000 + $3,600,000 + $3,600,000

Total fair value = $12,000,000

Now let calculate the initial values of the building, land, and equipment

Using this formula for BUILDING

Building= Total cost of acquisition × (Fair value of building ÷ Total fair value)

Let plug in the formula

Building= $8,500,000 × ($4,800,000 ÷ $12,000,000)

Building= $8,500,000 × 0.4

Building= $3,400,000

Using this formula for LAND

Land = Total cost of acquisition × (Fair value of land ÷ Total fair value)

Let plug in the formula

Land= $8,500,000 × ($3,600,000 ÷ $12,000,000)

Land= $8,500,000 × 0.3

Land= $2,550,000

Using this formula for EQUIPMENT

Equipment= Total cost of acquisition × (Fair value of Equipment ÷ Total fair value)

Let plug in the formula

Equipment= $8,500,000 × ($3,600,000 ÷ $12,000,000)

Equipment= $8,500,000 × 0.3

Equipment= $2,550,000

Therefore The initial values of the building, land, and equipment would be:$3,400,000; $2,550,000; $2,550,000