On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets included in the purchase agreement are as follows. E (Click the icon to view the other intangible assets.) Read the requirements Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation? Recorded value Tangible assets - X Data table Intangible assets: Covenant not to compete • Goodwill: $400,000 • Patents (13-year remaining useful life): $70,000 • Customer list $50,000 Goodwill Patents Customer list Total Print Done
On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets included in the purchase agreement are as follows. E (Click the icon to view the other intangible assets.) Read the requirements Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation? Recorded value Tangible assets - X Data table Intangible assets: Covenant not to compete • Goodwill: $400,000 • Patents (13-year remaining useful life): $70,000 • Customer list $50,000 Goodwill Patents Customer list Total Print Done
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
Section: Chapter Questions
Problem 62P
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Transcribed Image Text:On January 1 of the current year, Lemon Meyer Corporation purchases the net assets of Vivien's unincorporated business for $1,100,000. The tangible net assets
have a $400,000 book value and a $500,000 FMV. The purchase agreement states that Vivien will not compete with Lemon Meyer Corporation by starting a new
business in the same area for a period of five years. The stated consideration received by Vivien for the covenant not to compete is $80,000. Other intangible assets
included in the purchase agreement are as follows:
E (Click the icon to view the other intangible assets.)
Read the requirements
Requirement a. How would Vivien's assets be recorded for tax purposes by Lemon Meyer Corporation?
Recorded value
Tangible assets
Data table
Intangible assets:
Covenant not to compete
• Goodwill: $400,000
• Patents (13-year remaining useful life): $70,000
• Customer list $50,000
Goodwill
Patents
Customer list
Total
Print
Done
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