Question

Whispering Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $333,900. The estimated fair values of the assets are land $63,600, building $233,200, and equipment $84,800. At what amounts should each of the three assets be recorded?

Answer 1

Land = $55,650

Building = $204,050

Equipment = $74,200

Step-by-step explanation:

The total estimated fair value (FV) is:

`FV = $63,600+$233,200+$84,800\\FV= \$ 381,600`

The ratio (R) of the total fair value paid is:

`R=(\$333,900)/(\$381,600) \\R=0.875`

Each asset should be recorded at the amount of its fair value multiplied by the ratio of the fair value that was actually paid.

`Land = \$63,600 * 0.875= \$55,650\\Building = \$233,200 * 0.875= \$204,050\\Equipment =\$84,800 * 0.875= \$74,200`