Homework SourseAllocation of Package Purchase Price Andrew Lupino went into
Allocation of Package Purchase Price
Andrew Lupino went into business by purchasing a car lubrication station consisting of land, a building, and equipment. The seller\'s original asking price was $210,000. Lupino hired an appraiser for $2,000 to appraise the assets. The appraised valuations were:
After receiving the appraisal, Lupino offered $180,000 for the business. The seller refused this offer. Lupino then offered $190,000 for the business, which the seller accepted. Using the appraisal values as a guide, allocate the total purchase price of the car lubrication station to the Land, Building, and Equipment accounts.
| Property | Assessed Value |
|---|---|
| Land | $38,000 |
| Building | 95,000 |
| Equipment | 57,000 |
| Total | $190,000 |
Solution
Using the appraisal values as a guide, the total purchase price of $190,000 allocated to the car lubrication station to the Land, Building, and Equipment accounts is:
Land $38,000
Building $95,000
Equipment $57,000
As the assessed value and the total purchase price is same so the value allocated will also be same.
