Question

Land, a building and equipment are acquired for a lump sum of $6,000,000. The market values of the land, building and equipment are $400,000, $800,000 and $300,000, respectively

asked May 14, 2016 in Business by NewYorker
What is the cost assigned to the equipment? (Do not round any intermediary calculations, and round your final answer to the nearest dollar.)

A) $500,000
B) $1,200,000
C) $300,000
D) $2,000,000

Answer 1

b. $1,200,000

Step-by-step explanation:

The computation of cost assigned to the equipment is given below:-

= (Lump sum amount ÷ Total market value) × Market value of equipment

= $6,000,000 ÷ ($400,000 + $800,000 + $300,000) × $300,000

= $6,000,000 ÷ $1,500,000 × $300,000

= $4 × $300,000

= $1,200,000

Therefore for computing the cost assigned to the equipment we simply applied the above formula.