As Part of a Divorce Decree, Janet Must Give Her

question 36

Multiple Choice

As part of a divorce decree, Janet must give her ex-spouse Herman her half-interest in stock with a total value of $120,000 (total basis = $70,000) in exchange for his half-interest in their home with a total value of $150,000 and a basis of $130,000.What are Janet and Herman's realized and recognized gains or losses on this exchange? Janet: Realized Recognized Herman: Realized Recognized

• A)$30,000 $30,000 ($20,000) ($20,000)
• B)$30,000 0 $20,000 0
• C)$40,000 0 ($5,000) 0
• D)$40,000 $10,000 ($5,000) ($5,000)

---

Definitions:

Accrual Basis

A system in bookkeeping where earnings and expenses are documented at the point of transaction, not necessarily when cash exchanges hands.

Cash Basis

An accounting method that recognizes revenues and expenses only when cash is received or paid, as opposed to the accrual basis accounting.

Depreciation

The systematic allocation of the depreciable amount of an asset over its useful life, reflecting wear and tear, obsolescence, or loss of usefulness.

Plant And Equipment

Plant and Equipment refer to the long-term assets used in the operation of a business, excluding buildings or real estate, that contribute to the production process.