Question

Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,200,000. The building included used but functional equipment. According to independent appraisals, the fair values were $3,240,000, $4,320,000, and $3,240,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be: Building Land Equipment a. $ 3,240,000 $ 4,320,000 $ 3,240,000 b. $ 3,240,000 $ 4,320,000 $ 540,000 c. $ 2,460,000 $ 3,280,000 $ 2,460,000 d. None of these answer choices are correct.

Answer 1

Answer: c. $ 2,460,000 $ 3,280,000 $ 2,460,000

Explanation:

Sum the fair values from the independent appraisals up;

= 3,240,000 + 4,320,000 + 3,240,000

= $10,800,000

The fair value proportions of the Fixed assets will be used to calculate their value in the lump sum.

Building

= 3,240,000/10,800,000 * 8,200,000

= $‭2,460,000‬

Land

= 4,320,000/10,800,000 * 8,200,000

= $‭3,280,000

Equipment

= 3,240,000/10,800,000 * 8,200,000

= $‭2,460,000‬