Perry Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $550,000. At the time of acquisition Perry paid $20,000 to have the assets appraised. The appraisal disclosed the following values: $$\begin{array} { l r }
\text { Land } & \$ 320,000 \
\text { Buildings } & 256,000 \
\text { Equipment } & 64,000
\end{array}$$ What cost should be assigned to the land, buildings, and equipment, respectively?

Question

Perry Corporation acquired land, buildings, and equipment from a bankrupt company at a lump-sum price of $550,000. At the time of acquisition Perry paid $20,000 to have the assets appraised. The appraisal disclosed the following values: $$\begin{array} { l r } 
\text { Land } & \$ 320,000 \
\text { Buildings } & 256,000 \
\text { Equipment } & 64,000
\end{array}$$ What cost should be assigned to the land, buildings, and equipment, respectively?

Quizplus · Accepted Answer

The cost assigned to each asset is based on their relative fair market values. The total appraised value is $640,000 ($320,000 + $256,000 + $64,000). The purchase price plus appraisal cost is $570,000 ($550,000 + $20,000). The cost assigned to each asset is: Land = $570,000 * ($320,000 / $640,000) = $285,000; Buildings = $570,000 * ($256,000 / $640,000) = $228,000; Equipment = $570,000 * ($64,000 / $640,000) = $57,000.

Perry Corporation Acquired Land, Buildings, and Equipment from a Bankrupt Land $320,000 Buildings 256,000 Equipment 64,000\begin{array} { l r } \text { Land } & \$ 320,000 \\\text { Buildings } & 256,000 \\\text { Equipment } & 64,000\end{array} Land Buildings Equipment ​$320,000256,00064,000​

Perry Corporation Acquired Land, Buildings, and Equipment from a Bankrupt $\begin{array} { l r } \text { Land } & \$ 320,000 \\\text { Buildings } & 256,000 \\\text { Equipment } & 64,000\end{array}$