Question

Jamison Company purchased the assets of Booker Company at an auction for $5,600,000. An independent appraisal of the fair value of the assets is listed below: Land $1,900,000 Building 2,800,000 Equipment 2,100,000 Trucks 3,400,000 Assuming Jamison allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Trucks?

Answer 1

$1,866,667

Step-by-step explanation:

Express the Fair Value of Truck as a parentage of Total Fair Value and multiply by Total Purchase Price

Fair Value of Truck = $3,400,000

Total Fair Value = $1,900,000 + $2,800,000 + $2,100,000 + $3,400,000 = $10,200,000

Cost of Truck = $3,400,000 / $10,200,000 x $5,600,000 = $1,866,667

The amount that would be allocated to the Trucks is $1,866,667