Clipper Company bought three used machines located in Toronto for $10,000,000. The arrangement with the seller is to move all the equipment to Clipper€™s factory in Edmonton. It is understood that some of the equipment will be sold as scrap or disassembled and used as spare parts. A careful inventory of all the equipment is shown below. Clipper€™s plans are to maximize the value of each item by using it in its most beneficial manner.

Required:
Allocate the purchase price among the assets acquired.

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Value if installed and operated $3,000,000 4,500,000 2,000,000 $9,500,000 Value as spare parts S 900,000 5,000,000 1,600,000 S7,500,000 Value as scrap S 500,000 2,000,000 2,500,000 $5,000,000 Machine Total