On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows:Adjusted BasisFrom Fenton:CashAccounts ReceivableInventoryFrom Myers:Land$50,000-0-25,000250,000Fair Market Value$50,00090,00060,000200,000FM originally intended to hold the inventory as investment property. Myers held the land as long-term investment property,but FM will use it in its business as a Section 1231 asset.Within 30 days of formation, FM collects the receivables. Two years later, FM sells the inventory contributed by Fenton for$60,000 cash. After three years, FM sells the land for $200,000. How much income does FM recognize from thesetransactions, and what is its character?Please show all work and explain your calculations. Thank you.

Income is the excess balance of revenues over expenses. It normally has a credit balance and is…

Answered: $60,000 cash. After three years, FM…

$60,000 cash. After three years, FM sells the land for $200,000. How much income does FM recognize from these transactions, and what is its character?

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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