Question

Red Rock Bakery purchases land, building, and equipment for a single purchase price of $260,000. However, the estimated fair values of the land, building, and equipment are $126,000, $198,000, and $36,000, respectively, for a total estimated fair value of $360,000. Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.

Answer 1

Land ($91,000), building ($143,000) and equipment ($26,000)

Step-by-step explanation:

We can allocate the fair values as follows:

Particulars Fair value Allocated amount

(a) (b) = (a)/Total*$260,000

Land $126,000 $91,000

Building 198,000 143,000

Equipment 36,000 26,000

Total $360,000 $260,000

The amount that the company would record for the individual asset is as provided above.