Lump-Sum Purchase of Assets and Subsequent Events

Dixon Manufacturing purchased, for cash, three large pieces of equipment. Based on recent sales of similar equipment, the fair market values are as follows:

Piece 1	$200,000
Piece 2	$200,000
Piece 3	$440,000

Required:

1. What value is assigned to each piece of equipment if the equipment was purchased for (a) $480,000, (b) $680,000, and (c) $800,000?

Hint: First determine the percentage of the cost of each of the pieces of equipment to the total cost of all three pieces, rounded to one decimal place. If necessary, round any allocation calculations to the nearest dollar.

Total Purchase Price Scenario	Piece 1: Cost Assigned	Piece 2: Cost Assigned	Piece 3: Cost Assigned
a. $480,000	$fill in the blank 1	$fill in the blank 2	$fill in the blank 3
b. $680,000	$fill in the blank 4	$fill in the blank 5	$fill in the blank 6
c. $800,000	$fill in the blank 7	$fill in the blank 8	$fill in the blank 9

2. How does the purchase of the equipment affect total assets?

The purchase

increases decreases does not change does not change

total assets; it affects

dollar amount only the composition only the composition

of the assets.