Gumdrop Company made a package purchase of three pieces of machinery for $48,000. The fair market...
Gumdrop Company made a package purchase of three pieces of machinery for $48,000. The fair market values of the machinery were determined to be as follows:
|
Machine A |
$24,000 |
|
Machine B |
38,400 |
|
Machine C |
33,600 |
What cost should Gumdrop record for Machine C?
Homework Answers
Gumdrop should record Machine C at a cost of $ 16800 since three pieces of machinery are purchased at a cost of half of the total fair market values,that is,
Purchase price for 3 pieces of machinery = $ 48000
Total fair market value of 3 pieces of machinery = $ 96000 (24000 + 38400 + 33600), which is twice the purchase price.
So, the cost of Machine C should be recorded at half its fair market value, that is, 33600 * 1/2 = 16800.
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