The Morris Corporation acquired land,buildings,and equipment from a bankrupt company at a lump-sum price of $180,000.At the time of acquisition,Morris paid $12,000 to have the assets appraised.The appraisal disclosed the following values:

What cost should be assigned to the land,buildings,and equipment,respectively?

Question

The Morris Corporation acquired land,buildings,and equipment from a bankrupt company at a lump-sum price of $180,000.At the time of acquisition,Morris paid $12,000 to have the assets appraised.The appraisal disclosed the following values:

What cost should be assigned to the land,buildings,and equipment,respectively?

Quizplus · Accepted Answer

To determine the cost that should be assigned to each asset, we need to use the relative fair values of the assets as determined by the appraisal. This yields:

Land = ($40,000 / $140,000) × $180,000 = $51,429
Buildings = ($64,000 / $140,000) × $180,000 = $82,286
Equipment = ($36,000 / $140,000) × $180,000 = $46,286

Therefore, the cost should be assigned to the land, buildings, and equipment, respectively, is $96,000, $64,000, and $32,000. Thus, the correct answer is (C).

The Morris Corporation Acquired Land,buildings,and Equipment from a Bankrupt Company