If Section 1231 Applies to the Sale or Exchange of an Unharvested

question 21

Multiple Choice

If Section 1231 applies to the sale or exchange of an unharvested crop sold with land,the costs of producing the crop are

• A)capitalized.
• B)deducted as an expense of operations when incurred and also deducted from the sales price at the time of the sale.
• C)deducted when incurred if the land is sold but capitalized if the land is exchanged.
• D)deducted as an expense of operations when incurred.

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Definitions:

Net Income

The company's resulting profit when all deductions, including expenses and taxes, are made from the total income.

Classified Balance Sheet

A financial statement that organizes assets, liabilities, and equity into subcategories for detailed understanding.

Unclassified Balance Sheet

A balance sheet that presents assets and liabilities in a lump sum, without dividing them into classifications or categories.

Net Income

The amount of money a company earns after deducting all its expenses, taxes, and costs from its total revenue.