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Whispering Inc. purchased land, building, and equipment from Laguna Corporation for a cash payment of $333,900. The estimated fair values of the assets are land $63,600, building $233,200, and equipment $84,800. At what amounts should each of the three assets be recorded?

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Answer:

Land = $55,650

Building = $204,050

Equipment = $74,200

Explanation:

The total estimated fair value (FV) is:

[tex]FV = $63,600+$233,200+$84,800\\FV= \$ 381,600[/tex]

The ratio (R) of the total fair value paid is:

[tex]R=\frac{\$333,900}{\$381,600} \\R=0.875[/tex]

Each asset should be recorded at the amount of its fair value multiplied by the ratio of the fair value that was actually paid.

[tex]Land = \$63,600 * 0.875= \$55,650\\Building = \$233,200 * 0.875= \$204,050\\Equipment =\$84,800 * 0.875= \$74,200[/tex]

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