Basket Purchase Allocation: Crow Co. purchased some of themachinery of Hare Inc.

Question

Basket Purchase Allocation: Crow Co. purchased some of themachinery of Hare Inc. a bankrupt competitor, at a liquidation salefor a total cost of 33600. Crow's cost of moving and installing themachinery totaled 3200. The following data are available: Item           Hare's Net Book      List Price ofSame Item     Appraiser's Est.Fair                                      Value                      ifNew                              Value Punch Press      20,160                 36000                               24000 Lathe                  16128                 18000                               12000 Welder                4032                   6000                                 4000 Required: A. Calculate the amount that should be recored by Crow Co. athe cost of each piece of equipment. B. Which of the following alternatives should be used as thedeprecable life for Crow's Co.'s depreciation calculation? Explainyour answer. The remaining usefule life to Hare, Inc. The life of a new machine. The useful life of the asset to Crow Co. Basket Purchase Allocation: Crow Co. purchased some of themachinery of Hare Inc. a bankrupt competitor, at a liquidation salefor a total cost of 33600. Crow's cost of moving and installing themachinery totaled 3200. The following data are available: Item           Hare's Net Book      List Price ofSame Item     Appraiser's Est.Fair                                      Value                      ifNew                              Value Punch Press      20,160                 36000                               24000 Lathe                  16128                 18000                               12000 Welder                4032                   6000                                 4000 Required: A. Calculate the amount that should be recored by Crow Co. athe cost of each piece of equipment. B. Which of the following alternatives should be used as thedeprecable life for Crow's Co.'s depreciation calculation? Explainyour answer. The remaining usefule life to Hare, Inc. The life of a new machine. The useful life of the asset to Crow Co.

Explanation / Answer

This is not correct according to the Connect. You have not factored in the cost of moving and installing the machinery. Instead of using 33,600 as the total use 36,800, which includes the 3,200 Moving and Installing amount. (24000 / 40000) * 36800 which would gives $22,080 and is correct according to Connect. Do the same for the rest and you get the right values. Punch Press = 22,080 Lathe = 11,040 Welder = 3,680

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