On April 1, 2020, Renfro Corporation purchased land, a building, and some equipm

Question

 On April 1, 2020, Renfro Corporation purchased land, a building, and some equipment for $633,000. The following information is available concerning the property purchased:                                   Current Market Value   Land .......................           148,350   Building ...................           374,100   Equipment ..................              ?  Before the property could be used, Renfro had to spend $12,660 to renovate the building and $7,410 to put the equipment in working order. The cost that was assigned to the building totaled $379,800.  Calculate the cost assigned to the equipment.

Explanation / Answer

Total cost of the land, building and equipment is $633000. Current market value of land and building is 522450(148350+374100). Hence current market value of the equipment is $110550(633000-522450).

Additional cost to the building is $12660. That is why total value of the building will be $386760(374100+12660). Nevertheless as per the additional information provided total cost assigned to building is $379800. Here it is assumed that difference between $386760 and $379800 = $6960 will be assigned to the cost of equipment. And there is an another cost of $7410 incurred to put the equipment in order.

Then total cost assigned to the equipment will be $110550+$6960+$7410 = $124920

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