BASKET PURCHASE. Vandalia Products, Inc., recently purchased Xenia Tech- nology, a small manufacturing company, from the estate of the company’s founder. Van- dalia paid $1,800,000 cash for all the company’s assets. Fair values for the acquired assets were established by an independent appraisal firm; book values were taken from Xenia’s accounting records. The following assets were acquired:

REQUIRED:
1. Compute the cost to be recorded for each acquired asset, and prepare the journal entry to record the acquisition on Vandalia’s records.
2. Justify your choice of fair value or book value as the basis for computing the cost of each acquired asset.

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BOOK FAIR VALUE VALUE Land $10,000 $250,000 Building 120,000 350,000 Equipment, manufacturing.. 548,000 750,000 Furniture and fixtures 38,000 80,000 Trademark -0- 500,000 Inventory Totals 70,000 70,000 $786,000 $2,000,000