Question & Answer: Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total co…..

Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $17,000. Crows cost of moving and installing the machinery totaled $2,900. The following data are available Item Punch press Lathe Welder Hares Net Book Value on the Date of Sale $10,620 List Price of Same Item If New 18,000 9,000 Appraisers Estimate of Fair Value 15,000 5,000 3,020 8,410 2,960 5,000 Required a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. (Do not round intermediate calculations.) Purchase Price Allocation Punch press Lathe Welder Total 11,166 4,785 2.449 18,400 b. Which of the following alternatives should be used as the depreciable life for Crow Co.s depreciation calculation? The life of a new machine The useful life of the asset to Crow Co. The remaining useful life to Hare, Inc.

Crow Co. purchased some of the machinery of Hare, Inc., a bankrupt competitor, at a liquidation sale for a total cost of $17,000. Crow’s cost of moving and installing the machinery totaled $2,900. The following data are available: a. Calculate the amount that should be recorded by Crow Co. as the cost of each piece of equipment. (Do not round intermediate calculations.) b. Which of the following alternatives should be used as the depreciable life for Crow Co.’s depreciation calculation? The life of a new machine. The useful life of the asset to Crow Co. The remaining useful life to Hare. Inc.

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a)
Appraisers’ estimate of fair value Weight (in %) Amount to be recorded by Crow Co.
Punch Press 15000 65.16% 12966.84
(15000/23020) ((17000+2900)*65.16%)
Lathe 5000 21.72% 4322.28
(5000/23020) ((17000+2900)*21.72%)
Welder 3020 13.12% 2610.88
(3020/23020) ((17000+2900)*13.12%)
Total 23020 100.00% 19900
b) The useful life of the asset to Crow Co.

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