On February 1 Mr B purchased a business from Mr
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 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.
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