Question

Nanci purchases all of the assets of Michael's Security Service for $200,000. The assets are as follows: Asset Adjusted Basis Fair Market Value Inventory $25,000 $50,000 Equipment 60,000 40,000 Supplies 20,000 20,000 Building 80,000 95,000 Land 10,000 20,000 $195,000 $225,000 What is Nanci's basis in the equipment? a.$40,000 b.$17,776 c.$35,556 d.$61,538 e.$60,000

Answer 1

option (c) $35,556

Step-by-step explanation:

Data provided in the question:

Assets = $200,000

Asset Adjusted Basis FMV

Inventory $25,000 $50,000

Equipment $60,000 $40,000

Supplies $20,000 $20,000

Building $80,000 $95,000

Land $10,000 $20,000

=========================================

Total $195,000 $225,000

=========================================

Now,

FMV is greater than Basis

thus,

Percentage FMV on Equipment =
`\frac{\textup{FMV for equipment}}{\textup{Total FMV}}`

or

Percentage FMV on Equipment =
`\frac{\$40,000}{\textup{225,000}}*100\%`

= 17.77%

Therefore,

= Percentage FMV × Assets

or

= 17.77% × $200,000

= $35,555.56 ≈ $35,556

Hence,

The correct answer is option (c) $35,556