Question

A warehouse supply company purchased land, a building, and equipment in a lump-sum purchase for $495,000.  An...

A warehouse supply company purchased land, a building, and equipment in a lump-sum purchase for $495,000.  An independent appraisal set the value of the land at $296,000, the building at $210,900, and the equipment at $62,700.  Immediately following the purchase, the company spent $24,200 renovating the building to get it ready for its intended use.  At what amount should the warehouse supply company record each new asset - Land, Building, and Equipment, respectively? (Round to the nearest whole percentage if using the weighted average method.)

A.

$165,000, $165,000, and$165,000
B.

$257,400, $207,350, and $54,450
C.

$258,821, $205,551, and $54,828
D.

$269,984, $192,104, and $57,112
E.

$296,000, $235,100, and $62,700
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Homework Answers

Answer #1

“weighted average method” will be used to allocate the purchase price by taking into consideration the appraisal value of assets

Weight average method:

Asset

Appraisal value

Weight

Land

296000

52%

Building

210900

37&

Equipment

62700

11%

Total

569600

100%

* Round to the nearest whole percentage

Allocation of purchase price:

Land = 495000*52%=257400

Building = 495000*37%=183150+24200=207350

Equipment = 495000*11%= 54450

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