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 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. Which of the following taxpayers may report the sale of their property as an installment sale? A) Alexander. He sold a backhoe to Reno for $8,000. Reno made two payments, one payment of $2,500 on March 15 and one payment of $5,500 on September 15 of the tax year. Alexander paid $6,000 for the backhoe when it was new; it had fully depreciated before he sold it. B) Georgia. She sold her entire inventory, valued at $9,000, to Maxim for $12,000. Maxim intends to pay Georgia $4,000 per year, plus interest, for the next three years. C) Jackson. He sold a plot of land for $50,000. He purchased the land for $45,000 and paid $10,000 to improve it. His buyer intends to pay for the land over five years. D) Sita. She sold a rental condominium for $120,000. She purchased it for $95,000 and had claimed $20,000 depreciation. Her buyer intends to pay her $19,000 per year plus 6% interest for five years.

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