Question

The Claxton Company acquired an office building on three acres of land for a lump-sum price of $2,800,000. The building was completely furnished. According to independent appraisals, the fair values were $1,680,000, $2,100,000, and $420,000 for the building, land, and furniture and fixtures, respectively. The initial values of the building, land, and furniture and fixtures would be:

Building, Land, Fixtures

a.

$

1,680,000

$

2,100,000

$

420,000

b.

$

1,120,000

$

1,400,000

$

280,000

c.

$

1,400,000

$

1,120,000

$

280,000

d.

None of the ABove

Answer 1

The correct answer is option (b) :-
Fair values
Building	1,680,000
Land	2,100,000
Furniture	420,000
Total Fair values	4,200,000
Initial values:-
Building = $(2,800,000*1,680,000)/4,200,000 = $1,120,000
Land = $(2,800,000*2,100,000)/4,200,000 = $1,400,000
Furniture = $(2,800,000*420,000)/4,200,000 = $280,000