Lump-Sum Purchase To add to his growing chain of grocery stores, on January 1, 2010, Danny Marks

Question:

Lump-Sum Purchase To add to his growing chain of grocery stores, on January 1, 2010, Danny Marks bought a grocery store of a small competitor for $520,000. An appraiser, hired to assess the acquired assets’ value, determined that the land, building, and equipment had market values of $200,000, $150,000, and $250,000, respectively.

Required

1. What is the acquisition cost of each asset? Identify and analyze the effect of the acquisition.

2. Danny plans to depreciate the operating assets on a straight-line basis for 20 years. Determine the amount of depreciation expense for 2010 on these newly acquired assets. You can assume zero residual value for all assets.

3. How would the assets appear on the balance sheet as of December 31, 2010?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...