Question

simpson and homer corporation acquired an office building on three acres of land for a lump-sum price of $2,400,000. The building was completely equipped. According to independent appraisals, the fair values were $1,300,000, $780,000, and $520,000 for the building, land, and equipment, respectively. At what amount would the company record the building

Answer 1

The amount that the company would record for building would be $1,200,000.

Step-by-step explanation:

We can allocate the fair values as follows:

Particulars Fair value Allocated amount

(a) (b) = (a)/Total*$2.4m

Building $1,300,000 $1,200,000

Land $780,000 720,000

Equipment $520,000 480,000

Total $2,600,000 $2,400,000

The amount that the company would record for building would be $1,200,000.