Question

Crow Co. purchased some of the machinery of Hare Inc., a bankrupt competitor, at a liquidation sale for a total cost of $136,200. Crow's cost of moving and installing the machinery totaled $12,300. The following data are available: Item Punch press Lathe Welder Hare's Net Book Value on List Price of Same the Date of Sale Item If New $ 85,400 $ 131,000 58,200 67,000 26,400 42,000 Appraiser's Estimate of Fair Value $108,000 45,000 27,000 Required: a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. Purchase Price Allocation Punch press Lathe Welder Total

Answer 1

Answer to Question a:

Question a Allocation of Appraised Total Cost Value Punch Press $ 108,000 Lathe $ 45,000 Percentage of Total Appraised Value Calculation 60% (108,000/180,000) 25% (45,000/180,000) Total Cost of Acquisition $ 148,500 $ 148,500 Purchase Price Allocation Calculation $ 89,100 (148,500 X 60%) $ 37,125 (148,500 X 25%) $ 148,500 Welder Total $ $ 27,000 180,000 15% (27,000/180,000) 100% $ $ 22,275 (148,500 X 15%) 148,500 Total Cost of Acquisition = Purchase Price + Cost of Moving and Installing Total Cost of Acquisition = $136,200 + $12,300 Total Cost of Acquisition = $148,500