Basket purchase allocation Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $33,600. Crow’s cost of moving and installing the machinery totaled $3,200. The following data are available:
| Hare’s Net Book |
|
|
| Value on the | List Price of | Appraiser’s Estimate |
Item | Date of Sale | Same Item If New | of Fair Value |
Punch press | $20,160 | $36,000 | $24,000 |
Lathe | 16,128 | 18,000 | 1 2,000 |
Welder | 4,032 | 6,000 | 4,000 |
Required:
a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment.
b. Which of the following alternatives should be used as the depreciable life for Crow Co.’s depreciation calculation? Explain your answer.
The remaining useful life to Hare, Inc.
The life of a new machine.
The useful life of the asset to Crow Co.
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