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 would allocate the total purchase price based on the relative fair values of the assets acquired. The total fair value of the assets is $1,000,000 ($100,000 for land + $700,000 for building + $200,000 for equipment). The land's fair value ($100,000) represents 10% of the total fair value of all assets. Therefore, 10% of the purchase price ($800,000) is allocated to the land, resulting in $80,000 ($800,000 * 10%).

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