The Warthog Company purchased land, buildings, and equipment for $2,400,000. The land has been appraised at $865,000, the buildings at $1,175,000, and the equipment at $510,000. The equipment account will be debited for:

Question

Quizplus · Accepted Answer

The total cost of the assets is $2,400,000, and the sum of their individual appraisals is $2,550,000 ($865,000 + $1,175,000 + $510,000). Therefore, the total amount of goodwill in this transaction is $150,000. Since the land and buildings were appraised for more than their cost, they should be recorded at those higher values. The equipment, on the other hand, was appraised for less than its cost, so it should be recorded at its cost of $510,000. Therefore, the equipment account will be debited for $510,000.

The Warthog Company Purchased Land, Buildings, and Equipment for $2,400,000