Answered: Choose the response that correctly…

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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Choose the response that correctly completes the following sentence about an individual partner's outside basis in a partnership. A partner's outside basis: A) Cannot be less than zero. B) Does not change as long as the partner maintains their partnership interest. C) Is used to apply the basis limitation to losses from a partnership. D) Must be tracked by the partnership. An S corporation shareholder may carry forward unallowed loss that exceeds the basis of their stock (increased by any loans the shareholder made to the corporation) for what period of time? A) A maximum of two years. B) A maximum of ten years. C) A maximum of twenty years. D) Indefinitely, until they are allowed to deduct the entire amount. The Form 1099-A, Acquisition or Abandonment of Secured Property, gives the taxpayer the information that they need to calculate: A) The amount that they will need to pay to avoid having to give up their property. B) Gain or loss from the sale of the property. C) Their ordinary income from the cancellation of debt. D) Overdue loan payments, plus the additional interest and fees. Choose the response that correctly states the amount of a seller's gain or loss on repossessed real property with a fair market value of $54,000 on the date of repossession. The unpaid balance of the installment obligation at the time of repossession is $56,000, the gross profit percentage is 25%, and the costs of repossession were $800. A) Loss of $13,200 B) Loss of $11,200 C) Gain of $11,200 D) Gain of $13,200 Kenisha spent a total of $115,000 to purchase a business, including $15,000 in legal fees for the preparation of the sales contract, and $100,000 paid to the seller. She received a building with a fair market value (FMV) of $70,000, land with an FMV of $10,000, and furniture and fixtures with an FMV of $20,000. What is Kenisha's basis in the building, land, and furniture? A) $70,000 building; $10,000 land; $20,000 furniture and fixtures. B) $75,000 building; $15,000 land; $25,000 furniture and fixtures. C) $80,500 building; $11,500 land; $23,000 furniture and fixtures. D) $85,000 building; $10,000 land; $20,000 furniture and fixtures.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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