Land, buildings and equipment are acquired for a lump sum of $875,000. The market values of the three assets are, respectively, $200,000, $500,000 and $300,000. What is the cost assigned to the equipment?

Question

Quizplus · Accepted Answer

The cost assigned to each asset is based on its proportion of the total market value. The total market value is $1,000,000 ($200,000 + $500,000 + $300,000). The equipment's market value is $300,000, which is 30% of the total market value. Therefore, the cost assigned to the equipment is 30% of $875,000, which is $262,500.

Land, Buildings and Equipment Are Acquired for a Lump Sum