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Osborne company acquired three machines for $200,000 in a package deal. The three assets together had...

Osborne company acquired three machines for $200,000 in a package deal. The three assets together had a book value of $160,000 on the seller’s books. An appraisal costing the purchaser $2,000 indicates that the three machines had the following market value (book values are given in parentheses)   

Machine 1. Machine 2. Machine 3
A). $40,000. $53,333. $66,667
B). $50,000. $62,500. $87,500
C). $40,000. $50,000. $70,000
D). $50,500. $67,333. $84,167

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Expert Solution

Company Allocation Table
Allocation of Total Cost Appraisal Value % of Total appraised value Total Cost of Acquistion Apportioned Cost
Machine 1 $40,000 0.25 $202,000 $50,500
Machine 2 $53,333 0.33 $202,000 $66,660
Machine 3 $66,667 0.42 $202,000 $84,840
Total $160,000 1 $202,000
Since the Book values for the three machines is not visible in parathensis from the below we have that the first row is
pertaining to the market values and rest are book values .So the first row have been taken as the market value or the
appriasal value when making the purchase
The apportioned cost is based on the rule that when there is a lumpsum payment made for various purchases it is
necessary that the relative % of the appriased value is calculated and then allocated the lump sum amount as per that
% to the various purchases to find the cost of acquisition.
So the calculation for the three machine will be as below
Machine 1 ($202000)*.25
Machine 2 ($202000)*.33
Machine 3 ($202000)*.42

ekkarill92 answered 2 years ago
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