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1. Cantor Corporation acquired a manufacturing facility on 4 acres of land for a lump sum...

1. Cantor Corporation acquired a manufacturing facility on 4 acres of land for a lump sum price of $8,000,000. The building included used, but functional, equipment. According to independent appraisals, the fair market values were $4,500,000 for the building, $30,00,000 for the land, and $2,500,000 for the equipment. What would be the value of the purchase price allocated to the building, land, and equipment?

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Answer #1

When fixed asset is purchased for lumpsum the purchase price allocated to different asset is calculated using the given formula

valueof asset= fair value of the asset / fair value of total asset purchased* lumpsum paid

Asset Fair value % of total fair value lumpsum value of asset
(a) (b) (c) (d) (e=d*c)
(%)
Building $     45,00,000.00 45.00 $ 80,00,000.00 $       36,00,000.00
Land $     30,00,000.00 30.00 $ 80,00,000.00 $       24,00,000.00
Equipment $     25,00,000.00 25.00 $ 80,00,000.00 $       20,00,000.00
Total $ 1,00,00,000.00 $       80,00,000.00
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