Question
Andrew purchased Maple Manufacturing Company on March 17 of the current year for a lump-sum price of $3.5 million. The value of the assets was
Andrew purchased Maple Manufacturing Company on March 17 of the current year for a lump-sum price of $3.5 million. The value of the assets was as follows:
| Carrying | Fair Market | |||
| Amount | Value | |||
| | | |||
| Inventory | $ 100,000 | $ 100,000 | ||
| Cash | 500,000 | 500,000 | ||
| Equipment | 1,650,000 | 1,750,000 | ||
| Building | 400,000 | 750,000 | ||
| Land | 100,000 | 150,000 | ||
| Covenant not to compete | 0 | 175,000 | ||
| Goodwill | 0 | 75,000 |
Andrew assumed no liabilities. What is his basis in the covenant not to compete?
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Managerial Accounting
Authors: Ray Garrison, Eric Noreen, Peter Brewer
15th edition
978-0077522940
