Select the best answer for each of the following. Hickory Company made a lump-su

Question

Select the best answer for each of the following. Hickory Company made a lump-sum purchase of 3 pieces of machinery for $115,000 from an unaf- filiated company. At the time of acquisition, Hick- ory paid $5,000 to determine the appraised value of the machinery. The appraisal disclosed the fol- lowing values Machine A MachineB Machine C M10-1 LO2 $70,000 $42,000 $28,000 What cost should be assigned to Machines A, B, and C, respectively? $40,000 $40,000 $40,000 b. $57,500$34,500 $23,000 $60,000 $36,000 $24,000 d. $70,000 $42,000 $28,000

Explanation / Answer

Solution:-

Value declared by the the valuer:-

A:- 70000

B:- 42000

C:- 28000

Total :- 140000

Proportionate of each of the above:-

A:- (70000/140000)*100 = 50%

B:- (42000/140000)*100 = 30%

C:- (28000/140000)*100 = 20%

Now, total cost incurred to acquire all 3 assets = 115000 + 5000 =$ 1,20,000

A:- 120000*50% = $ 60,000

B:- 120000*30%= $ 36,000

C:- 120000*20% = $24,000

So the answer must be C

So the total amount will be proportionate as per the above percentage calculated:-

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