Question
Timmy paid $800,000 cash for all of the assets of Bobs Chicken Fried Steak Shack, Inc. (Bobs). Timmy did not buy the stock of Bobs;
Timmy paid $800,000 cash for all of the assets of Bobs Chicken Fried Steak Shack, Inc. (Bobs). Timmy did not buy the stock of Bobs; rather he bought all of Bobs assets from Bob.
Here is a list of the physical assets that Timmy got for his $800,000, showing the stand-alone FMV of each category:***
- Land & Building, $350,000
- Furniture & Equipment, $160,000
- Inventory, $15,000
Bobs latest property tax appraisal from Dallas County showed the land value at $150,000, the building at $100,000, the furniture and equipment at $75,000.
- What is Timmys depreciable basis in the building?
- What is Timmys depreciable basis in the furniture and equipment?
- What amount will Timmy eventually record as COGS with respect to the purchased inventory?
- How much, if any, goodwill did Timmy purchase?
Address each item separately. (Each part must be correctly answered to earn a point for this item (3).)
*** These FMVs are as agreed and stated in the negotiated Purchase Agreement.
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