Exercise 10-18 (Algorithmic) (LO. 3) On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows. Adjusted Basis Fair Market Value From Fenton: Cash $182,500 $182,500 Accounts receivable 328,500 Inventory 91,250 228,125 From Myers: Land 789,125 739,125 FM 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 § 1231 asset. Within 30 days of formation, FM collects the receivables. Two years later, FM sells the inventory contributed by Fenton for $228,125 cash. After three years, FM sells the land for $739,125. FM realized the following income in the current year from these transactions: of $ from collecting cash basis accounts receivable. of $ from sale of inventory. For the land sale, FM recognizes a $ These rule exists to ensure that a partner and partnership property between themselves and alter the inherent character of the underlying deferred income, gain, loss, or deduction.
Exercise 10-18 (Algorithmic) (LO. 3) On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows. Adjusted Basis Fair Market Value From Fenton: Cash $182,500 $182,500 Accounts receivable 328,500 Inventory 91,250 228,125 From Myers: Land 789,125 739,125 FM 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 § 1231 asset. Within 30 days of formation, FM collects the receivables. Two years later, FM sells the inventory contributed by Fenton for $228,125 cash. After three years, FM sells the land for $739,125. FM realized the following income in the current year from these transactions: of $ from collecting cash basis accounts receivable. of $ from sale of inventory. For the land sale, FM recognizes a $ These rule exists to ensure that a partner and partnership property between themselves and alter the inherent character of the underlying deferred income, gain, loss, or deduction.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Exercise 10-18 (Algorithmic) (LO. 3)
On January 2 of the current year, Fenton and Myers form the FM LLC. Their contributions to the LLC are as follows.
Adjusted Basis
Fair Market Value
From Fenton:
Cash
$182,500
$182,500
Accounts receivable
328,500
Inventory
91,250
228,125
From Myers:
Land
789,125
739,125
FM 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 § 1231 asset.
Within 30 days of formation, FM collects the receivables. Two years later, FM sells the inventory contributed by Fenton for $228,125 cash.
After three years, FM sells the land for $739,125.
FM realized the following income in the current year from these transactions:
of $
from collecting cash basis accounts receivable.
of $
from sale of inventory.
For the land sale, FM recognizes a $
These rule exists to ensure that a partner and partnership
property between themselves and alter the inherent
character of the underlying deferred income, gain, loss, or deduction.
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