During 2014, Garnet Corporation purchased three pieces of equipment at an auction for the lump sum of $200,000. It cost Garnet $40,000 to have the equipment delivered and installed. The equipment was appraised at the following fair values:
Machine 1 $\quad $$120,000
Machine 2 $\quad $105,000
Machine 3 $\quad $75,000
Machine 2 should be recorded on Garnet's books at

Question

During 2014, Garnet Corporation purchased three pieces of equipment at an auction for the lump sum of $200,000. It cost Garnet $40,000 to have the equipment delivered and installed. The equipment was appraised at the following fair values:
Machine 1  $\quad $$120,000
Machine 2  $\quad $105,000
Machine 3  $\quad $75,000
Machine 2 should be recorded on Garnet's books at

Quizplus · Accepted Answer

The total cost of the equipment ($240,000) is allocated based on the proportion of each machine's fair value to the total fair value. The total fair value is $300,000. Machine 2's fair value is $105,000, which is 35% of the total fair value. Therefore, 35% of the total cost ($240,000) is allocated to Machine 2, resulting in $84,000.

During 2014, Garnet Corporation Purchased Three Pieces of Equipment at an Auction