Barber Corporation purchased all the assets of TECO Corporation for $1,820,000.An appraisal yielded the following: the building had a fair market value of $1,200,000; equipment a value of $1,000,000; and office equipment a value of $400,000.What is the depreciable basis for the office equipment?
A)$400,000
B)$300,000
C)$280,000
D)$250,000

Question

Quizplus · Accepted Answer

The total fair market value of the assets is $2,600,000 ($1,200,000 + $1,000,000 + $400,000). Barber Corporation purchased the assets for $1,820,000, which is less than their total fair market value. To find the depreciable basis for each asset, we allocate the purchase price based on the proportion of each asset's fair market value to the total fair market value. For the office equipment, the proportion is $400,000 / $2,600,000 = 15.38%. Applying this percentage to the purchase price: $1,820,000 * 15.38% = $280,000.

Barber Corporation Purchased All the Assets of TECO Corporation for $1,820,000.An