Allocation of Package Purchase Price and Depreciation MethodsIn an expansion move, Beam Company paid $2,480,000 for most of the property, plant, and equipment of a small manufacturing firm that was going out of business. Before agreeing to the price, Beam hired a consultant for $20,000 to appraise the assets. The appraised values were as follows:Land$432,000Building1,026,000Equipment1,080,000Trucks162,000Total$2,700,000 Beam issued two checks totaling $2,500,000 to acquire the assets and pay the consultant on April 1. Beam depreciated the assets using the straight-line method for the building and equipment, and the double-declining balance method for the trucks. Estimated useful lives and salvage values were as follows: Useful LifeSalvageValueBuilding15 years$86,000Equipment9 years70,000Trucks5 years13,000

Solution: Purchase Price Allocation (PPA) is an application and a process of goodwill accounting…

Answered: n an expansion move, Beam Company paid…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Allocation of Package Purchase Price and Depreciation Methods

In an expansion move, Beam Company paid $2,480,000 for most of the property, plant, and equipment of a small manufacturing firm that was going out of business. Before agreeing to the price, Beam hired a consultant for $20,000 to appraise the assets. The appraised values were as follows:

Land	$432,000
Building	1,026,000
Equipment	1,080,000
Trucks	162,000
Total	$2,700,000

Beam issued two checks totaling $2,500,000 to acquire the assets and pay the consultant on April 1. Beam depreciated the assets using the straight-line method for the building and equipment, and the double-declining balance method for the trucks. Estimated useful lives and salvage values were as follows:

	Useful Life	Salvage Value
Building	15 years	$86,000
Equipment	9 years	70,000
Trucks	5 years	13,000

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