Question

Crow Co. purchased some of the machinery of Hare Inc., a bankrupt competitor, at a liquidation sale for a total cost of $16,000. Crow's cost of moving and installing the machinery totaled $1,400. The following data are available: Item Punch press Lathe Welder Hare's Net Book Value on the Date of Sale 10,600 8,330 2,690 List Price of Same Item If New $ 17,000 8,000 4,000 Appraiser's Estimate of Fair Value $ 15,000 6,000 3,080 Required: a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. (Do not round intermediate calculations.) Purchase Price Allocation Punch press Lathe Welder Total $ 0 Java Indate Availab

Answer 1

COMPUTE COST OF EACH PIECE OF EQUIPMENT

Items	appraiser estimate fair value	allocation percentage
Punch press	15000/15000+6000+3000	15000/24000=0.625×100= 62.5%
Lathe	6000/15000+6000+3000	6000/24000=0.25×100= 25%
Welder	3000/15000+6000+3000	3000/24000=0.125×100= 12.5%

Total cost =$16000+$1400= $17400

Cost of punch press= $17400×62.5%=$10875

Cost of lathe. = $17400×25%=$4350

​​​​​Cost of welder = $17400×12.5%=$2175

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