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Basket Purchase Allocation: Equipment Costs and Depreciation Calculation

Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $33,600. Crow's cost of moving and installing the machinery totalled $3,200. See the data in the attached file.

Required:

a) Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment.
b) Which of the following alternatives should be used as the depreciable life for Crow Co.'s depreciation calculation? Explain your answer.
- The remaining useful life to Hare's, Inc
- The life of a new machine
- The useful life of the asset to Crow Co.

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Solution Preview

-- Complete formatted solution in the attached WORD document.

Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $33,600. Crow's cost of moving and installing the machinery totaled $3,200. The following data are available:

Item Hare's Net Book Value List Price of Appraiser's Estimate
on the Date of Sale ...

Solution Summary

This solution calculates the required amounts for Crow Co. involving the purchase of Hare, Inc. Includes an attached Word-formatted document.

$2.19