Pract exam3 part14 2011 - CHAPTER 14 Know: how is realized...

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CHAPTER 14 Know: how is realized gain/ loss calculated? What is realized gain/ loss? What is recog- nized gain/ loss? How do we calculate recognized gain loss? What is basis? How do we calculate basis? MULTIPLE CHOICE 1. Albert purchased a tract of land for $140,000 in 2006 when he heard that a new highway was going to be constructed through the property and that the land would soon be worth $200,000. Highway engineers surveyed the property and indicated that he would probably get $180,000. The highway project was abandoned in 2010 and the value of the land fell to $100,000. What is the amount of loss Albert can claim in 2010? a. $40,000. b. $60,000. c. $80,000. d. $100,000. e. None of the above. ANS: E Neither gain nor loss is recognized by Albert associated with the perceived fluctuations in the value of the land. The requisite identifiable event (i.e., sale or other disposition) has not occurred. PTS: 1 DIF: 1 REF: Example 3 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 5 min 2. Kate sells property for $120,000. The buyer pays $2,000 in property taxes that had accrued during the year while the property was still legally owned by Kate. In addition, Kate pays $6,000 in commissions and $2,000 in legal fees in connection with the sale. How much does Kate realize from the sale of her property? a. $112,000. b. $114,000. c. $116,000. d. $120,000. e. None of the above. ANS: B The amount realized is calculated as follows: Sales price $120,000 Taxes paid by buyer on behalf of seller 2,000 Less: Commissions (6,000) 14-1
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14-2 2011 Annual Edition/Test Bank Legal fees (2,000) Amount realized $114,000 PTS: 1 DIF: 1 REF: p. 14-3 | p. 14-4 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 5 min 7. Jamie bought her house in 2001 for $395,000. Since then, she has deducted $70,000 in depreciation associated with her home office and has spent $45,000 replacing all the old pipes and plumbing. She sells the house on July 1, 2010. Her realtor charged $34,700 in commissions. Prior to listing the house with the realtor, she spent $300 advertising in the local newspaper. Sammy buys the house for $500,000 in cash, assumes her mortgage of $194,000, and pays property taxes of $4,200 for the entire year on December 1, 2010. What is Jamie’s adjusted basis at the date of the sale and the amount realized? a. $370,000 adjusted basis; $661,400 amount realized. b. $370,000 adjusted basis; $661,100 amount realized. c. $370,000 adjusted basis; $665,200 amount realized. d. $325,000 adjusted basis; $663,200 amount realized. e. $325,000 adjusted basis; $694,000 amount realized. ANS: B Cost $395,000 Depreciation (70,000) Capital additions 45,000 Adjusted basis $370,000 Cash received $500,000 Mortgage assumed by Sammy 194,000 Commission to realtor (34,700) Advertising (300) Property tax paid by Sammy ($4,200 × 6/12) allocated to Jamie 2,100 Amount realized $661,100 PTS: 1 DIF: 1 REF: p. 14-4 | p. 14-5 OBJ: 1 NAT: AICPA FN-Measurement | AACSB Analytic MSC: 10 min 8. Alicia buys a beach house for $325,000 which she uses as her personal vacation home. She builds an
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This note was uploaded on 02/27/2012 for the course ECON 4371 taught by Professor Muir during the Spring '12 term at King Mongkut's Institute of Technology Ladkrabang.

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Pract exam3 part14 2011 - CHAPTER 14 Know: how is realized...

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