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23 January, 10:20

Mohave Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $315,000. The estimated fair values of the assets are land $60,000, building $220,000, and equipment $80,000. At what amounts should each of the three assets be recorded? (Round final answer to 0 deciaml places, e. g. 5,275.)

Recorder Amount

Land

Building

Equipment

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Answers (1)
  1. 23 January, 13:09
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    Recorder Amount: 315000

    Land: 52500

    Building: 192500

    Equipment: 70000

    Explanation:

    Record the value with the lower of cost or fair value. Since the cost (cash price) is lower. We calculate the proportion of each asset using the fair value figures:

    formula: percentage of each asset as a function of fair value multiplied by cash payment.

    Total: 60000+220000+80000=360000

    land=0.167 (that is 60/360) * 315000 = 52500

    Building=0.611 * 315000 = 192500

    Equipment = 0.22*315000=70000
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