The ABC Partnership Owns the Following Assets on December 31

question 71

Multiple Choice

The ABC Partnership owns the following assets on December 31. $$\begin{array} { | l | r | r | } \hline & { \text { Basis } } & { \text { FMV } } \\\hline \text { Cash } & \$ 20,000 & \$ 20,000 \\\hline \text { Unrealized receivables } & 0 & 40,000 \\\hline \text { Inventory } & \$ 20,000 & 30,000 \\\hline \text { Land (Sec. } 1231 \text { asset) } & 50,000 & 90,000 \\\hline\end{array}$$ The indication that ABC owns substantially appreciated inventory is

• A)the total FMV of all assets except cash is greater than their total basis.
• B)the FMV of all assets except land is $90,000 while their bases is $40,000.
• C)the FMV of the inventory is $30,000 while its adjusted basis is $20,000.
• D)the FMV of the inventory and unrealized receivables is $70,000 while their adjusted bases is $20,000.

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Definitions:

Operating Cash Flow

Cash generated from a company's regular operational activities, reflecting its ability to generate cash from its core business operations.

Top-Down Approach

A method of analysis that starts with the broader economy or large investment categories and works its way down to individual stocks or securities.

Sales

The total amount of goods or services sold by a company within a specified period.

Internal Rate of Return

The discount rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.