Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment would be:

Question

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The lump-sum price is allocated based on the relative fair values of the assets. The total fair value is $10,000,000 ($4,500,000 + $3,000,000 + $2,500,000). The allocation is: Building: ($4,500,000/$10,000,000) * $8,000,000 = $3,600,000; Land: ($3,000,000/$10,000,000) * $8,000,000 = $2,400,000; Equipment: ($2,500,000/$10,000,000) * $8,000,000 = $2,000,000.

Cantor Corporation Acquired a Manufacturing Facility on Four Acres of Land