Relative-market-value Chap 9.docx

Relative-market-value Chap 9.docx - Relative-Market-Value...

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Relative-Market-Value Method to Allocate Purchase Price 1. Basket purchase or lump-sum purchase – Pay $90,000 for land, land improvements, and building in a lump-sum purchase. The fair market value of the land is $30,000, fair market value of the land improvements is $10,000 and the fair market value of the building is $60,000. How is the $90,000 allocated to the three assets? We will use the relative-market-value method . FMV – fair market value – Total FMV is $100,000 ($30,000 for the land, $10,000 for the land improvements, and $60,000 for the building.) To use the relative-market-value method, add up all the FMV of the assets involved in the
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