Question

Cantor Corporation acquired a manufacturing facility on four acres of land for a lump-sum price of $8,000,000. The building included used but functional equipment. According to independent appraisals, the fair values were $4,500,000, $3,000,000, and $2,500,000 for the building, land, and equipment, respectively. The initial values of the building, land, and equipment in the general ledger would be:

Answer 1

Answer:

Land= 27,000,000

Equipment= 22,500,000

Building= 4,050,000

Explanation:

The first step is to calculate the total fair value

= 4,500,000+3,000,000+2,500,000

= 10,000,000

Therefore the initial volume of the land can be calculated as follows

= 9,000,000(3,000,000/10,000,000)

= 9,000,000×3

= 27,000,000

Initial value of the equipment is

= 9,000,000(2,500,000/10,000,000)

= 9,000,000(2.5)

= 22,500,000

Initial value of the building is

= 9,000,000(4,500,000/10,000,000)

= 9,000,000(0.45)

= 4,050,000