PSU Enterprises purchased a small timber company for $200 000 net of GST .The fair values of the individual assets acquired net of GST were: $$\begin{array} { l c l r }
& \$ && \$ \
\text { Building } & 80,000 & \text { Standing timber } & 120,000 \
\text { Land } & 20,000 & \text { Equipment } & 30,000
\end{array}$$ At what amount should standing timber be recorded by PSU?

Question

PSU Enterprises purchased a small timber company for $200 000 net of GST .The fair values of the individual assets acquired net of GST were: $$\begin{array} { l c l r } 
& \$ && \$ \
\text { Building } & 80,000 & \text { Standing timber } & 120,000 \
\text { Land } & 20,000 & \text { Equipment } & 30,000
\end{array}$$ At what amount should standing timber be recorded by PSU?

Quizplus · Accepted Answer

The total fair value of the assets is $250,000. The purchase price is $200,000. The standing timber should be recorded at its proportionate share of the purchase price: ($120,000 / $250,000) * $200,000 = $96,000.

PSU Enterprises Purchased a Small Timber Company for $200 000