Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Dunja for$68,000 cash plus the assumption of his share of ProRite's liabilities. Assume Newton's inside and outside bases inProRite are equal. ProRite shows the following balance sheet as of the sale date:AssetsCashReceivablesInventoryLandTotalsLiabilities andcapital:LiabilitiesCapital-NewtonCapital-BarbaraCapital-LizTotalsTax Basis$ 96,50028,00040, 25036,500FMV$ 96,50028,000110, 75023,500$ 201, 250 $ 258,750$ 60,00047,08347,08447,083$ 201, 250What are the amount and character of Newton's recognized gain or loss?

Liabilities are the amount to be paid. Liabilities is shared among the partners on the basis of…

Answered: Newton is a one-third owner of ProRite…

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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Required information When High Horizon LLC was formed, Maude contributed the following assets in exchange for a 25 percent capital and profits interest in the LLC: Fair Market Value Basis Maude: Cash Land* $ 20,000 20,000 100,000 360,000 Totals $120,000 $380,000 Nonrecourse debt secured by the land equals $160,000 James, Harold, and Jenny each contributed $220,000 in cash for a 25 percent profits and capital interest. (Leave no answer blank. Enter zero if applicable.) d. What is High Horizon's tax basis in its assets? Tax basis
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Dan Nichols has owned and operated a proprietorship for several years. On January 1, he decides to terminate this business and become a partner in the firm of Nichols and Rathke. Nichols’s investment in the partnership consists of $14,000 in cash, and the following assets of the proprietorship: accounts receivable $20,000 less allowance for doubtful accounts of $3,000, and equipment $25,000 less accumulated depreciation of $5,000. It is agreed that the allowance for doubtful accounts should be $4,000 for the partnership. The fair value of the equipment is $17,500.Instructions:Journalize Nichols’s admission to the firm of Nichols and Rathke.
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RAMI has owned and operated a proprietorship for several years. On January 1, 2018, he decides to terminate this business and become a partner in the firm of ASMA and RAMI. ✓ RAMI's investment in the partnership consists of HK$ 140,000 in CASH, and the following assets of the proprietorship: ✔ ACCOUNTS RECEIVABLE HK$130,000 less allowance for doubtful accounts of HK$20,000, ✓ and EQUIPMENT HK$200,000 less accumulated depreciation of HK$45,000. It is agreed that the allowance for doubtful accounts should be HK$28, 000 for the partnership. The fair value of the equipment is HK$175, 500. ASMA brings with her $200,000 Book value in CASH, $ 280,000 Fair value. on Dec. 31, 2018, the net income was $100,000 and the income ratios are RAMI 70%, ASMA 30%. Prepare the journal entry to record the division of the net income. Instructions Journalize RAMI's admission to the firm of ASMA and RAMI.
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Newton is a one-third owner of ProRite Partnership. Newton has decided to sell his interest in the business to Betty for $50,000 cash plus the assumption of his share of ProRite’s liabilities. Assume Newton’s inside and outside bases in ProRite are equal. ProRite shows the following balance sheet as of the sale date: Tax Basis FMV Assets Cash $ 80,000 $ 80,000 Receivables 25,000 25,000 Inventory 40,000 85,000 Land 30,000 20,000 Totals $ 175,000 $ 210,000 Liabilities and capital Liabilities $ 60,000 Capital— Newton 38,333 Capital— Barbara 38,334 Capital— Liz 38,333 Totals $ 175,000 What are the amount and character of Newton’s recognized gain or loss?
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