Question

Chico Company paid $530,000 for a basket purchase that included office furniture, a building and land. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture – $125,000; Building – $430,000, Land – $95,000. Based on this information, and rounding allocations to two decimal places, the amount of cost that would be allocated to the office furniture is closest to: (Round your intermediate percentages to 2 decimal places: ie 0.054231 = 5.42%.):

Answer 1

19.23%

Step-by-step explanation:

if the total price paid was $530,000, that would equal 100%

now we must determine the specific weight of each component as estimated by the appraiser:

total value = $125,000 + $430,000 + $95,000 = $650,000

• office furniture = $125,000 / $650,000 = 0.1923 or 19.23%
• building = $430,000 / $650,000 = 0.6615 or 66.15%
• land = $95,000 / $650,000 = 0.1462 or 14.62%