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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.
Expert Answer
| 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. |
