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Item Hare’s Net Book Value on the Date of Sale List Price of Same Item If New Appraiser’s Estimate of Fair Value Punch press $ 10,250 $ 19,000 $ 16,000 Lathe 8,250 9,000 5,000 Welder 2,730 5,000 3,050 Required: a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment

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Answer:

  • Punch Press - $12,502
  • Lathe - $3,908.52
  • Welder - $2,344.36

Explanation:

Cost will be allocated based on proportion of total Appraiser's estimate of fair value.

Total Appraisal Estimate = 16,000 + 5000 + 3,050

= $24,050

Total Purchase Price = Purchase price + Installation cost

=17,000 + 1,800

=$18,800

Punch Press

Punch Press proportion = [tex]\frac{16,000}{24,050} * 100[/tex]

= 66.5%

Punch Press Cost = 66.5% * 18,800

= $12,502

Lathe

Lathe proportion = [tex]\frac{5,000}{24,050} * 100[/tex]

= 20.79%

Punch Press Cost = 20.79% * 18,800

= $3,908.52

Welder

Welder proportion = [tex]\frac{3,000}{24,050} * 100[/tex]

= 12.47%

Punch Press Cost = 12.47% * 18,800

= $2,344.36

Note; There are multiple variants of this question so be sure to check the figures to ensure it is the right one.

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