A company purchased property for $300,000. The property included an acre of land valued at $50,000, a building valued at $150,000, and equipment valued at $125,000.
-The equipment will be recorded at a cost of
A) $125,000.
B) $120,000.
C) $118,723.
D) $115,384.

Question

Quizplus · Accepted Answer

The equipment cost is calculated based on the proportion of its value relative to the total value of the assets purchased. The total purchase price is $300,000, and the equipment's value is $125,000. The proportion of the equipment's value to the total is $125,000 / ($50,000 + $150,000 + $125,000) = $125,000 / $325,000. However, since the purchase price is only $300,000, we need to adjust the values to fit this price. The equipment's adjusted cost is $125,000 / $325,000 * $300,000 = $115,384.62, which rounds to $115,384.

A Company Purchased Property for $300,000