Allocation of Package Purchase Price Tamock Company purchased a plant from one o

Question

Allocation of Package Purchase Price Tamock Company purchased a plant from one of its suppliers. The $950.000 purchase price included the land, a building, and factory machinery. Tamock also paid $5.000 in legal fees to negotiate the purchase of th- plant. An appraisal showed the following values for the items purchased: Assessed Value Property Land Building Machinery $126,000 36,000 288,000 5900,000 Total Using the assessed value as a guide, allocate the total purchase price of the plant to the land, building, and machinery accounts in Tamock Company's records Allocation of Asset Purchase Price Land Building Machinery Total

Explanation / Answer

Cost of plant = 950000 + 5000 = 955000

Allocation to land = 126000 / 900000 * 955000 = 133700

Allocation to Building = 486000 / 900000 * 955000 = 515700

Allocation to Machinery = 288000 / 900000 * 955000 = 305600

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