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.

Question

Business

Emilio Winters

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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Answers (1)

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Alissa Colon · Answer 1

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