Question

A company acquired three machines for $100,000 in a package deal. The three assets had a book value of $80,000 on the seller's books. An appraisal costing the purchaser $1,000 indicated that the three machines had the following market values.

Machine 1: $30,000 ($20,000)
Machine 2: $40,000 ($25,000)
Machine 3: $50,000 ($35,000)

At what amount should the three assets be individually recorded in the buyer’s books?

Answer 1

The Individual assets will be recorded by the buyer as :

Machine 1 = $25,250

Machine 2= $33,667

Machine 3= $42,083

Step-by-step explanation:

On Initial measurement, IAS 16 requires assets to be measured at cost to the buyer.

Apportion the Cost of $101,000 ($100,000 + $1,000) using individual market values of the assets.

Machine 1 = $30,000 / $120,000 × $101,000

= $25,250

Machine 2= $40,000 / $120,000 × $101,000

= $33,667

Machine 3= $50,000 / $120,000 × $101,000

= $42,083