Question

Marigold Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $371,700. The estimated fair values of the assets are land $70,800, building $259,600, and equipment $94,400. At what amounts should each of the three assets be recorded?

Answer 1

Land = $ 61,950

Building = $ 227,150

Equipment = $ 82,600

Step-by-step explanation:

Given the following fair values

Land = $ 70,800

Building = $259,600

Equipment = $ 94,400

Total cost (based on fair value) = 70,800 + 259,600 + 94,400

= $ 424,800

Cash payment given = $ 371,700

Using the proportion system to allocate the cost,

Cost of land =
`(70800)/(424800)` × 371700

= $ 61,950

Cost of building =
`(259600)/(424800)` × 371700

= $ 227,150

Cost of Equipment =
`(94400)/(424800)` × 371700

= $ 82,600

Therefore, the amounts to be recorded in the books for land, building and equipment are $ 61,950, $ 227,150 and $ 82,600 respectively.