Answer:
Building = $1,340,000
Land = $1,675,000
Furniture and fixtures = $335,000
Explanation:
This is an example of Basket Asset Purchase whereby a number of assets purchased as one package.
Initial value of each asset is are determined by the Basket Asset Purchase based on their relative fair market value as follows:
Building = $3,350,000 × [$2,560,000 ÷ ($2,560,000 + $3,200,000 + $640,000)] = $3,350,000 × 0.4 = $1,340,000
Land = $3,350,000 × [$3,200,000 ÷ ($2,560,000 + $3,200,000 + $640,000)] = $3,350,000 × 0.5 = $1,675,000
Furniture and fixtures = $3,350,000 × [$640,000 ÷ ($2,560,000 + $3,200,000 + $640,000)] = $3,350,000 × 0.1 = $335,000
Therefore, the initial values of the building, land, and furniture and fixtures would be $1,340,000, $1,675,000, and $335,000 respectively.
