Perry IncAnd Dally Company Entered into an Exchange of Real Property

question 21

Multiple Choice

Perry Inc.and Dally Company entered into an exchange of real property.Here is the information for the properties to be exchanged. Pursuant to the exchange,Perry assumed the mortgage on the Dally property,and Dally assumed the mortgage on the Perry property.Compute Dally's gain recognized on the exchange and its tax basis in the property received from Perry.

• A)$30,000 gain recognized; $313,000 basis in the Perry property.
• B)100,000 gain recognized; $383,000 basis in the Perry property.
• C)$30,000 gain recognized; $283,000 basis in the Perry property.
• D)None of the choices are correct.

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Definitions:

Idle Capacity

The condition when resources, typically manufacturing or production facilities, are available but not in use.

Activity Rates

The costs assigned to specific activities, used in activity-based costing to allocate overhead costs more accurately.

Activity Cost Pools

Categories in activity-based costing that aggregate indirect costs incurred by multiple cost objects, allowing for more precise allocation.

Activity-Based Costing

Activity-Based Costing is a method that assigns costs to products or services based on the activities they require, aiming for more accurate allocation of overhead.