Question

Azubuike Ltd. purchased inventory, land, and a building for a lump-sum purchase price of $1,500,000 from a bankrupt competitor. Appraised values were as follows:

Inventory: $200,000;
Land: $600,000;
Building: $1,200,000.

The land should recorded as an asset on Azubuike’s books for:______

Answer 1

Answer:

$450,000

Explanation:

The appraised values will be used as the basis for apportioning the cost of the assets purchased in the book in a direct proportion manner.

Total appraisal value = $200,000 + $600,000 + $1,200,000

= $2,000,000

Hence the land will be recorded as;

= ($600,000/$2,000,000) × $1,500,000

= $450,000