Red Cedar Bakery purchases land, building, and equipment for a single purchase price of $500,000. However, the estimated fair values of the land, building, and equipment are $210,000, $330,000, and $60,000, respectively, for a total estimated fair value of $600,000 Required: Determine the amounts Red Cedar should record in the separate accounts for the land, the building, and the equipment. Land Building Equipment Total Estimated Fair Value S 0 Allocation Percentage % % Amount of Basket Purchase Recorded Amount $

Red Cedar Bakery purchases land, building, and equipment for a single purchase price of $500,000. However, the estimated fair values of the land, building, and equipment are $210,000, $330,000, and $60,000, respectively, for a total estimated fair value of $600,000 Required: Determine the amounts Red Cedar should record in the separate accounts for the land, the building, and the equipment. Land Building Equipment Total Estimated Fair Value S 0 Allocation Percentage % % Amount of Basket Purchase Recorded Amount $

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Capital Gain

Any capital asset when sold can give the seller a higher or lower price from its purchase price leading to a capital gain or capital loss. The time period of holding an asset is decided based on if it is a long term or short-term capital gain. On that basis, the rate of taxation is decided if it is 20%, 15% or according to the tax brackets. The rate of taxation differs in the case of equity or debt, whether long or short term. The capital gain can be adjusted from capital loss to arrive at a net capital gain. The amount of gains and the exemption has to be reported in the tax return filed in the financial year in which the asset was transferred. The tax return can be filed quarterly, monthly, semi-annually or annually.

Question

Red Cedar Bakery purchases land, building, and equipment for a single purchase price of $500,000. However, the estimated fair
values of the land, building, and equipment are $210,000, $330,000, and $60,000, respectively, for a total estimated fair value of
$600,000
Required:
Determine the amounts Red Cedar should record in the separate accounts for the land, the building, and the equipment.
Land
Building
Equipment
Total
Estimated Fair Value
$
Allocation
Percentage
%
%
%
Amount of Basket
Purchase
Recorded.
Amount
$

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