Concord Corporation purchased the assets of Ivanhoe Company at an auction for $5640000. An independent appraisal of the fair value of the assets is listed below:
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Concord Corporation purchased the assets of Ivanhoe Company at an auction for $5640000. An independent appraisal of the fair value of the assets is listed below:
| Land | $1830000 | |
| Building | 2910000 | |
| Equipment | 2250000 | |
| Trucks | 3250000 |
Assuming that specific identification costs are impracticable and that Concord allocates the purchase price on the basis of the relative fair values, what amount would be allocated to the Building?
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