Exercise 7-3A Allocate costs in a basket purchase (LO7-1)Red Rock Bakery purchases land, building, and equipment for a single purchase price of $320,000. However, the estimated fair valuesof the land, building, and equipment are $147,000, $252,000, and $21,000, respectively, for a total estimated fair value of $420,000.Required:Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.Estimated Fair ValueAllocationPercentageAmount of BasketPurchaseRecordedAmountLandBuilding$147,00025%$320,000252,00065%320,000Equipment21,00010%320,000Total$420,000$0

The lump sum value of the assets is allocated to different assets on the basis of the market or fair…

Required: Determine the amounts Red Rock should record in the separate accounts for the land, the Estimated Fair Value Allocation Percentage Amount of Basket Purchase Recorded Amount Land Building $ 147,000 25% $ 320,000 252,000 65 % 320,000 Equipment Total 21,000 10 % 320,000 69 420,000 $ 0

Required: Determine the amounts Red Rock should record in the separate accounts for the land, the Estimated Fair Value Allocation Percentage Amount of Basket Purchase Recorded Amount Land Building $ 147,000 25% $ 320,000 252,000 65 % 320,000 Equipment Total 21,000 10 % 320,000 69 420,000 $ 0

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Question

Exercise 7-3A Allocate costs in a basket purchase (LO7-1)
Red Rock Bakery purchases land, building, and equipment for a single purchase price of $320,000. However, the estimated fair values
of the land, building, and equipment are $147,000, $252,000, and $21,000, respectively, for a total estimated fair value of $420,000.
Required:
Determine the amounts Red Rock should record in the separate accounts for the land, the building, and the equipment.
Estimated Fair Value
Allocation
Percentage
Amount of Basket
Purchase
Recorded
Amount
Land
Building
$
147,000
25%
$
320,000
252,000
65%
320,000
Equipment
21,000
10%
320,000
Total
$
420,000
$
0

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