Seeder Inc. made a lump-sum purchase of three pieces of machinery for $120,000 from an unaffiliated company. At the time of acquisition, Seeder paid $4,000 to determine the appraised value of the machinery. The appraisal disclosed the following values: Machine A $60,000
Machine B $36,000
Machine C $24,000
What cost should be assigned to Machines A, B, and C, respectively?
A) A: $60,000; B: $36,000; C: $24,000
B) A: $62,000; B: $37,200; C: $24,800
C) A: $64,000; B: $33,600; C: $22,400
D) A: $41,333; B: $41,333; C: $41,333

Question

Quizplus · Accepted Answer

The total appraised value is $120,000. The $4,000 appraisal cost is added to the purchase price, making the total cost $124,000. The allocation is based on the proportion of each machine's appraised value to the total appraised value. Machine A: ($60,000/$120,000) * $124,000 = $62,000; Machine B: ($36,000/$120,000) * $124,000 = $37,200; Machine C: ($24,000/$120,000) * $124,000 = $24,800.