Jacob-Morley Company recently purchased 2 hectares of land with a manufacturing facility and several pieces of equipment for $3.7 million.As a part of the financing terms, the assets had to be appraised.The appraisal report outlined the following values: land $1.2 million, building $2 million and equipment $950,000.At what cost should Jacob-Morley record each of the assets? $\begin{array}{rrr}
&\text { Land } & \text { Building }& \text { Equipment }\
a)&\$ 0 & \$ 3,700,000 & \$ 0 \
b)&\$ 1,069,880 & \$ 1,783,132 & \$ 846,988 \
c)&\$ 1,200,000 & \$ 2,000,000 & \$ 950,000 \
d)&\$ 1,069,880 & \$ 2,630,120 & \$ 0
\end{array}$

Question

Quizplus · Accepted Answer

The cost of each asset should be recorded based on their appraised values in proportion to the total purchase price. The total appraised value is $4.15 million ($1.2 million for land, $2 million for building, and $950,000 for equipment). The purchase price is $3.7 million, which is less than the total appraised value. Therefore, each asset's recorded cost is a proportion of the purchase price based on its appraised value.

Jacob-Morley Company Recently Purchased 2 Hectares of Land with a Manufacturing