Question

Braxwell Corporation acquired the following assets associated with a manufacturing facility for a lump-sum price of $9,400,000. According to independent appraisals, the fair values were $1,100,000, $2,200,000, $3,300,000, and $4,400,000 for the building, patent, land, and equipment, respectively. The initial value of the patent would be:

Answer 1

purchase cost of patent = $1,880,000

Step-by-step explanation:

total independent values = $1,100,000 + $2,200,000 + $3,300,000 + $4,400,000 = $11,000,000

we must allocate the purcahse cost proportionally:

purchase cost of building = $1,100,000/$11,000,000 x $9,400,000 = $940,000

purchase cost of patent = $2,200,000/$11,000,000 x $9,400,000 = $1,880,000

purchase cost of land = $3,300,000/$11,000,000 x $9,400,000 = $2,820,000

purchase cost of equipment = $4,400,000/$11,000,000 x $9,400,000 = $3,760,000