Assume that a building and the land it is situated on, along with a dump truck,

Question

Assume that a building and the land it is situated on, along with a dump truck, are purchased at an auction. The three assets were purchased together for a price of $150,000. The fair market value of the assets are shown in the table below. Determine each asset's percentage of fair market value total. Then, apply that percentage to the group purchase cost to determine the allocated cost to be recorded for each asset. Percent of tolAllocated cost Land Building Truck Total Fair market value $54,375 30,500 32,625 $217,50 100% 150,000

Explanation / Answer

Assets Fair Value Percent of total (Weights= Respective Fair Value / Total Value) Allocated Cost (Weight * $ 150,000) Land 54,375 25.00 % $37,500 Building 130,500 60.00 % $ 90,000 Truck 32,625 15.00 % $ 22,500 217,500 100 % $ 150,000

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