Chico Company paid $950,000 for a basket purchase that included office furniture,a building and land.An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Office furniture - $190,000;Building - $740,000,Land - $132,000.Based on this information,and rounding allocations to two decimal places,the amount of cost that would be allocated to the office furniture is closest to:
A)$171,000.
B)$190,000.
C)$316,667.
D)$105,000.

Question

Quizplus · Accepted Answer

To calculate the allocation of the cost of the basket purchase, we need to use the relative market values of the assets.

First, we need to calculate the total market value of the assets:
$190,000 + $740,000 + $132,000 = $1,062,000

The next step is to find the ratio of the market value of each asset to the total market value:
Office furniture: $190,000 / $1,062,000 = 0.179 
Building: $740,000 / $1,062,000 = 0.697 
Land: $132,000 / $1,062,000 = 0.124

Finally, we can use these ratios to allocate the total cost of $950,000 to each asset: 
Office furniture: 0.179 x $950,000 = $170,550 (rounded to $171,000) 
Building: 0.697 x $950,000 = $661,150 
Land: 0.124 x $950,000 = $117,300

Therefore, the amount of cost allocated to the office furniture is closest to $171,000.

Chico Company Paid $950,000 for a Basket Purchase That Included