During year 1, the Commander Corporation acquired 3 pieces of machinery at an auction for a lump sum price of $240,000. In addition, Commander paid $12,000 to have the machines installed. An appraisal disclosed the following values: Machine A $ 50,000 Machine B $ 150,000 Machine C $ 100,000 What costs should be assigned to Machines A, B, and C, respectively

$42,000, $126,000, and $ 84,000.

Explanation:

The computation of cost assigned for each of the machines is as follows:

Allocation of the ratio is

Machine A   $50,000   1

Machine B $150,000   3

Machine C $100,000   2

i.e.

1:3:2

Now the allocation is

For machine A

= ($240,000 + $12,000) × 1 ÷ 6

= $42,000

For machine B

= ($240,000 + $12,000) × 3 ÷ 6

= $126,000

For machine B

= ($240,000 + $12,000) × 2 ÷ 6

= $84,000

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