A Corporation Distributes Land Worth $200,000 to Its Sole Shareholder

question 48

Multiple Choice

A corporation distributes land worth $200,000 to its sole shareholder. The corporation had purchased the land several years ago for $120,000. The corporation has over $1 million of E&P. How much income will the corporation and the shareholder recognize?

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Definitions:

Cafeteria Department

A functional division within an organization that provides food and beverage services to employees.

Reciprocal Services Method

A cost allocation technique used in managerial accounting to allocate costs between interdependent departments by solving simultaneous equations.

Sequential Method

A cost allocation method used for assigning the costs of support departments to operating departments sequentially, in a specific order based on the level of service provided.

Algebraic Expressions

Mathematical phrases that can contain ordinary numbers, variables, and mathematical operations, but do not have an equality sign.