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29 April, 10:45

Minott Jewelers, Ltd., purchased store fixtures, display cases, and a amaximum security commercial safe for a lump sum price of 14,000 from a bankruptcy competitor. Appraised values were as follows: store fixtures, $6,000: display cases, $9,000: commercial safe, $5, 000.

What cost should be recorded for the commercial safe?

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  1. 29 April, 11:00
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    the correct answer is $3,500.

    Explanation:

    According to the scenario, the given data are as follows:

    Total purchase = $14,000

    Appraised Store fixtures = $6,000

    Appraised display cases = $9,000

    Appraised Commercial safe = $5,000

    So, we can calculate the cost that should be recorded for commercial safe by using following formula:

    Cost of commercial safe = Total purchase cost * Percentage allocate for safe

    Where, Percentage allocate for safe = Appraised Commercial safe value : Total appraised value

    = $5,000 : ($6,000 + $9,000 + $5,000)

    = $5,000 : $20,000

    = 25%

    So, by putting the value, we get

    Cost of commercial safe = $14,000 : 25%

    = $3,500.

    Hence, the cost that should be recorded for commercial safe is $3,500.
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