Reference no: EM132976916
Mike Company operates in a real estate industry and acquires, leases, sells, and manages real estate properties. On 1/1/2018, Mike acquires 20 single-family homes in "Ironwood" neighborhood in Champaign Illinois. Each home has a different floor plan and square footage. The transaction includes a parcel of land, building, and in-place lease for each property. Seller's employees that perform leasing, tenant management, financing, and other strategic management processes were not acquired. Mike believes that the nature of all single-family homes is similar. Mike also concludes that the risks associated with operating in the real estate market of the single-family homes acquired are not significantly different.
First step of the business test: Is substantially all of the fair value of the gross assets acquired concentrated in a single identifiable asset or group of similar identifiable assets?
To answer this question we need to answer the following three questions below:
Problem (a) What assets were acquired in this transaction?
Problem (b) Use FASB codification and determine what is/are the single identifiable asset/s for the first step of the business test?
Problem (c) Can the single identifiable assets be combined into a group of similar identifiable assets?
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