How is the cost of a lump-sum purchase allocated

Reference no: EM132709408

Question 1. How is the cost of a lump-sum purchase allocated to the individual assets acquired? Provide a simple example of how the allocation would be performed if your company paid $1,000,000 cash in total for a restaurant (land, building, and equipment), and the appraised value was actually $1,200,000 for the 3 asset components $400,000, $500,000, and $300,000, respectively.

Question 2. Does the balance in the Accumulated Depreciation - Machinery account represent funds to replace the machinery when it wears out? If not, what does it represent?

Reference no: EM132709408

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