Answered: b. If Jay treats the assets as a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Jay sold three items of business equipment for a total of $300,000. None of the equipment was appraised to determine its value. Jay's cost and adjusted basis for the assets are shown below.

Asset	Cost	Adjusted Basis
Skidder	$230,000		$40,000
Driller	120,000	60,000
Platform	620,000	−0−
Total	$970,000	$100,000

Jay has been unable to establish the fair market values of the three assets. All he can determine is that combined they were worth $300,000 to the buyer in this arm's length transaction.

b. If Jay treats the assets as a single group, determine the amount and nature of the gain or loss. There is an overall gain of $______ of which $________ is § 1245 gain.

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