Belmont Corporation made a basket purchase of land, a building and equipment, paying a total of $1,500,000. Market values for the assets were not available, but the appraised values were $300,000 for the land, $900,000 for the building, and $600,000 for equipment. What amounts should be recorded in the Land, Building, and Equipment accounts, respectively?
A) $250,000, $750,000, and $500,000
B) $300,000, $900,000, and $600,000
C) $500,000, $500,000, and $500,000
D) $1,500,000, $-0-, and $-0-

Question

Quizplus · Accepted Answer

The total purchase price is allocated based on the proportion of each asset's appraised value to the total appraised value. The total appraised value is $1,800,000 ($300,000 + $900,000 + $600,000). The land's allocation is ($300,000/$1,800,000) * $1,500,000 = $250,000, the building's allocation is ($900,000/$1,800,000) * $1,500,000 = $750,000, and the equipment's allocation is ($600,000/$1,800,000) * $1,500,000 = $500,000.

Belmont Corporation Made a Basket Purchase of Land, a Building