Q: A fire damaged industrial equipment used by Firm L in its manufacturing
A fire damaged industrial equipment used by Firm L in its manufacturing process. Immediately before the fire, the equipment was worth $40,000. After the fire, the equipment was worth only $15,000. Fir...
See AnswerQ: Company LR owns a commercial office building. Four years ago,
Company LR owns a commercial office building. Four years ago, LR entered into a long-term lease with Lessee M for 2,400 square feet of office space. LR spent $13,600 to finish out the space to meet Le...
See AnswerQ: Two years ago, Corporation M loaned $80,000 to
Two years ago, Corporation M loaned $80,000 to its employee Mr. E. The corporation received Mr. E’s properly executed note in which he promised to repay the loan at the end of seven years and to pay a...
See AnswerQ: In its first taxable year, Corporation NM generated a $25
In its first taxable year, Corporation NM generated a $25,000 net operating loss and recognized an $8,000 net capital loss. The corporation’s tax return for its second year reported $15,000 taxable in...
See AnswerQ: Firm WD sold depreciable realty for $225,000. The
Firm WD sold depreciable realty for $225,000. The firm purchased the realty 12 years earlier for $350,000 and deducted $155,000 MACRS depreciation through date of sale. During an audit of the tax retu...
See AnswerQ: Corporation AD operates four antique dealerships. Last year, it sold
Corporation AD operates four antique dealerships. Last year, it sold a 200-year-old desk to its sole shareholder, Mr. C, for $35,000. AD reported its $2,700 gain as ordinary income from the sale of in...
See AnswerQ: Mr. V sold his sole proprietorship to an unrelated party for
Mr. V sold his sole proprietorship to an unrelated party for a lump-sum price of $900,000. The contract of sale specifies that $100,000 is for a page 8-40 covenant not to compete—Mr. V’s promise not t...
See AnswerQ: ST Inc. and Firm WX are negotiating an exchange of the
ST Inc. and Firm WX are negotiating an exchange of the following business properties. ST agrees to pay $150,000 cash to WX to equalize the value of the exchange. ST’s adjusted basi...
See AnswerQ: On May 19, WJ realized a $48,000 loss
On May 19, WJ realized a $48,000 loss on the sale of 10,000 shares of voting common stock in XZY Corporation. On May 30, WJ purchased 3,200 shares of XZY nonvoting preferred stock.
See AnswerQ: HomeSafe, an accrual basis, calendar year corporation, sells and
HomeSafe, an accrual basis, calendar year corporation, sells and installs home alarm systems. The contract price of a system includes four free service calls. HomeSafe’s cost of each call is $75. At t...
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