On February 1, Mr B purchased a business from Mr and Mrs S for a lump sum price of $750,000 The business included the following balance sheet assets Appraised FMV Accounts receivable $ 27,600 Inventory 195,000 Office supplies (4 months worth) 8,500 Furniture and fixtures 395,000 By buying the busin...

Mr B will recover the cost of the accounts receivable as h ...

On February 1, Mr. B purchased a business from Mr. and Mrs. S for a lump-sum price

Question:

On February 1, Mr. B purchased a business from Mr. and Mrs. S for a lump-sum price of $750,000. The business included the following assets:
Appraised FMV
Accounts receivable ……………………… $ 27,600
Inventory …………………………………. 195,000
Office supplies (4 months’ worth) ………… 8,500
Furniture and fixtures ……………………… 395,000
By buying the business, Mr. B acquired a favorable lease on office space with a remaining term of 31 months; he estimates that the value of this lease is $20,000. The purchase contract stipulates that Mr. and Mrs. S will not engage in a competitive business for the next 36 months. Discuss how Mr. B can recover the cost of each of the business assets acquired in this purchase.
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...