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31 July, 03:04

Allocation of Package Purchase Price Tamarack Company purchased a plant from one of its suppliers. The $1,000,000 purchase price included the land, a building, and factory machinery. Tamarack also paid $6,000 in legal fees to negotiate the purchase of the plant. An appraisal showed the following values for the items purchased: Property Assessed Value Land $126,000 Building $456,000 Machinery $318,000 TOTAL $900,000 Using the assessed value as a guide, allocate the total purchase price of the plant to the land, building, and machinery accounts in Tamarack company's records.

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  1. 31 July, 04:39
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    The total purchase price of the plant allocated to the land, building, and machinery is $140,840, $509,707 and $355,453 respectively

    Explanation:

    The computation is shown below:

    For land

    = Total purchase price * appraisal value of land : total appraisal value

    = $1,006,000 * $126,000 : $900,000

    = $140,840

    For building

    = Total purchase price * appraisal value of building : total appraisal value

    = $1,006,000 * $456,000 : $900,000

    = $509,707

    For machinery

    = Total purchase price * appraisal value of land : total appraisal value

    = $1,006,000 * $318,000 : $900,000

    = $355,453

    where, the total purchase price is

    = $1,000,000 + $6,000

    = $1,006,000
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