Fruitasia purchased land,a building,and equipment for $800,000.The estimated fair values of the land,building,and equipment are $100,000,$700,000,and $200,000,respectively.At what amount would the company record the land?

Question

Quizplus · Accepted Answer

The company should allocate the purchase price based on the relative fair values of the assets. The total fair value is $1,000,000 ($100,000 + $700,000 + $200,000). The land's fair value is $100,000, which is 10% of the total fair value. Therefore, 10% of the purchase price ($800,000) is $80,000.

Fruitasia Purchased Land,a Building,and Equipment for $800,000