Nanci Purchases All of the Assets of Michael's Security Service

question 90

Multiple Choice

Nanci purchases all of the assets of Michael's Security Service for $200,000. The assets are as follows:
?
$$\begin{array} { l r r } \text { Asset } & \text { Adjusted Basis } & \text { Fair Market Value } \\\text { Inventory } & \$ 25,000 & \$ 50,000 \\\text { Equipment } & 60,000 & 40,000 \\\text { Supplies } & 20,000 & 20,000 \\\text { Building } & 80,000 & 95,000 \\\text { Land } & 10,000 & 20,000 \\& \$ 195,000 & \$ 225,000\end{array}$$
What is Nanci's basis in the equipment?

• A)$17,776
• B)$35,556
• C)$40,000
• D)$60,000
• E)$61,538

---

Definitions:

Relevant Market

The specific market segment in which a particular product or service competes, taking into consideration the product's substitute and the competition within this arena.

Geographic Market

An area or region wherein a company operates and competes for customers, often defined by political boundaries or population demographics.

Sherman Act

A U.S. antitrust law passed in 1890 that prohibits monopolistic business practices and promotes competition.

Price-Fixing Scheme

An illegal arrangement between parties to set the price of goods or services at a certain level, often to limit competition.