Question

Carlton Drake purchased the New York City Symbiotes, a major league baseball team, for $2 million. The appraised values of the identified assets are as follows: Stadium Prepaid season tickets $150,000 Player contracts500,000 Equipmen100,00 900,000 The Symbiotes are a highly successful team and won the pennant in the prior year. Determine Drake's adjusted basis for the assets of Symbiotes based upon the purchase price. (10 points)

Answer 1

Solution:

The portion of the purchase price of $1.5 million assigned to the identified assets computed as follows:

　

Prepaid season tickets	150,000
Stadium lease	400,000
Player contracts	500,000
Equipment	100,000
	1,150,000

　

Balance amount: $1,500,000 – $1,150,000 = $350,000

The residual value for the amount $350,000 will be adjusted / assigned to goodwill