24, ____ 24. Leg purchased a business from Judah for $1,200,000. Jedah’s records
ID: 2580673 • Letter: 2
Question
24,
____ 24. Leg purchased a business from Judah for $1,200,000. Jedah’s records and an appraiser provided her with the following information regarding the assets purchased:
Adjusted Basis
FMV
Land
$190,000
$450,000
Building
300,000
370,000
Equipment
85,000
260,000
What is Leg’s adjusted basis for the land, building, equipment and good will?
a.
Land $450,000, building $370,000, equipment $260,000, goodwill $120,000.
b.
Land $350,000, building $480,000, equipment $210,000, goodwill $260,000.
c.
Land $190,000, building $300,000, equipment $85,000, goodwill $120,000.
d.
Land $400,000, building $400,000, equipment $400,000, goodwill $100.
e.
None of the above.
Instructions : Choose the best multiple choice answer and explain why you chose the answer. MUST provide 2-3 sentence brief explanation and show all work. All sources must be noted.
Adjusted Basis
FMV
Land
$190,000
$450,000
Building
300,000
370,000
Equipment
85,000
260,000
Explanation / Answer
correct answer is option A
a.
Land $450,000, building $370,000, equipment $260,000, goodwill $120,000.
when the assets of business are acquired in lump-sum purchase, then purchase price is allocated in accordance with FMV (fair market value of assets) as on the date of acquisition. if there is any excess, that excess amount is assigned to goodwill. goodwill =1200000-450000-370000-260000 = 120000
a.
Land $450,000, building $370,000, equipment $260,000, goodwill $120,000.
when the assets of business are acquired in lump-sum purchase, then purchase price is allocated in accordance with FMV (fair market value of assets) as on the date of acquisition. if there is any excess, that excess amount is assigned to goodwill. goodwill =1200000-450000-370000-260000 = 120000
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