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Allocate purchase price over a basket of assets

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To add to his growing chain of grocery stores, on January 1, 2008, Danny Marks bought a grocery store of a small competitor for $520,000. An appraiser, hired to assess the value of the assets acquired, determined that the land had a market value of $200,000, the building a market value of $150,000 and the equipment a market value of $250,000.

Required:

1. What is the acquisition cost of each asset? Prepare a journal entry to record the acquisition.

2. Danny plans to depreciate the operating assets on a straight-line basis for 20 years. Determine the amount of depreciation expense for 2008 on these newly acquired assets. You can assume zero residual value for all assets.

3. How would the assets appear on the balance sheet as of December 31, 2008?

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Solution Summary

The solution explains how the assets purchase price is allocated and presents the journal entries. Depreciation is calculation and the fixed asset section of the balance sheet is presented in Excel.

Solution Preview

1. When a basket purchase of assets is made, the price is apportioned over the assets on a percentage basis as ...

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