Kai Owns an Apartment Building Held for Investment Purposes

question 48

Multiple Choice

Kai owns an apartment building held for investment purposes.The apartment building is worth $500,000,although it is subject to a mortgage of $100,000.Kai's basis in the apartment building is $380,000.Kai exchanges the apartment building for an office building.The office building has an FMV of $350,000.Kai receives $50,000 cash in addition to receiving the office building,and the other party assumes the apartment building mortgage.What is Kai's recognized gain on this exchange?

• A)$0
• B)$50,000
• C)$120,000
• D)$150,000

Analyze and determine the correct accounts to be debited and credited in various transactions related to notes and interest.

Appreciate the temporary vs. permanent nature of accounts involved in transactions related to notes receivable and payable.

Understand how to calculate accrued interest on notes payable.

Analyze and categorize different types of accounts, their normal balances, their placement in financial statements, and distinguish between temporary and permanent accounts.

---

Definitions:

Complex Capital Structure

A financial structure that includes various forms of securities, such as different classes of stock and convertible securities, which can affect the computation of earnings per share.

Diluted Earnings

A measure of a company's profitability that accounts for all potential shares that could be outstanding, providing a worst-case scenario for earnings per share.

Basic Earnings

Net income divided by the number of outstanding shares, representing a company's profit allocated to each share of stock.

Convertible Bonds

Bonds issued by a corporation that can be converted into a predetermined number of shares of the company's stock.