Johnson Inc

question 25

Multiple Choice

Johnson Inc.and C&K Company entered into an exchange of real property.Here is the information for the properties to be exchanged. Pursuant to the exchange,C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property.Compute Johnson's gain recognized on the exchange and its tax basis in the property received from C&K.

• A)$25,000 gain recognized; $593,000 basis in C&K property.
• B)$25,000 gain recognized; $793,000 basis in C&K property.
• C)$225,000 gain recognized; $593,000 basis in C&K property.
• D)None of the choices are correct.

---

Definitions:

Consolidated Financial Statements

Financial statements that integrate the financial information of a parent company with its subsidiaries to present the financial performance and position of the entire group as a single entity.

Legal Entities

Organizations or structures recognized by law as capable of having rights and duties, such as corporations, partnerships, and trusts.

Parent Company

A company that has controlling interest in another company or companies, known as subsidiaries.

Subsidiary

A company that is controlled by another company, known as the parent company, through ownership of more than half of its voting stock.