Question

Jamison Company purchased the assets of Booker Company at an auction for $4,200,000. An independent appraisal of the fair value of the assets is listed below:
Land $1,425,000
Building 2,100,000
Equipment 1,575,000
Trucks 2,550,000
Assuming that specific identification costs are impracticable and that Jamison allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Trucks?
A. $1,400,000
B. $2,100,000
C. $2,520,000
D. $2,550,000

Answer 1

Answer:

A. $1,400,000

Explanation:

Amount to be allocated = Auction price / Total individual price * Truck price

Auction price = $4,200,000

Total individual price =  $1,425,000  + $2,100,000  + 1,575,000 + $2,550,000 = $7,650,000

Truck price = $2,550,000

Amount to be allocated = ($4,200,000 / $7,650,000) * $2,550,000

Amount to be allocated = $1,400,000