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

The cost allocation should be based on the proportion of the appraised values to the total appraised value.

- Land: $48,000 / $160,000 (total appraised value of land and buildings) = 0.3
- Buildings: $80,000 / $160,000 = 0.5
- Equipment: $32,000 / $160,000 = 0.2

Then, the allocated costs would be:

- Land: 0.3 x $180,000 (total cost) = $54,000
- Buildings: 0.5 x $180,000 = $90,000
- Equipment: 0.2 x $180,000 = $36,000

Therefore, the answer is C, with the allocation of $96,000 for land, $64,000 for buildings, and $32,000 for equipment.

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