Answered: What is the amount and character of…

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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Question

Joan is a one-third partner in the PDJ Partnership. PDJ Partnership uses the proration method to allocate income and losses to partners with varying interests. On May 1, Joan sells her interest to Freddie for a cash payment of $102,250. On January 1, Joan's basis in PDJ is $84,000. PDJ generates $69,000 of ordinary income and $11,400 of tax-exempt income during the first four months of the year. PDJ has the following assets and no liabilities at the sale date:

Note: Do not round intermediate calculations. Round your final answer to the nearest whole dollar amount.

	Basis	Fair Market Value
Cash	$ 47,100	$ 47,100
Land held for investment	$ 47,100	$ 94,200

What is the amount and character of Joan's gain or loss on the sale?

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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