A Taxpayer Purchased a Factory Building in 1985 for $800,000

question 932

Multiple Choice

A taxpayer purchased a factory building in 1985 for $800,000. After claiming ACRS- accelerated depreciation of $800,000, she sells the asset for $1,000,000 during the current year. No payment is received during the current year, and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale. The installment sales method is adopted. How much ordinary income is recognized in the current year?

• A) $800,000
• B) $200,000
• C) $0
• D) $1,000,000

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Definitions:

Job Completion

Job completion refers to the finalization of a task or project, marking the point at which all work has been finished as per the requirements.

Cost of Goods Sold

The expenses directly associated with manufacturing the products a company sells.

Underapplied Overhead

A scenario in which the manufacturing overhead costs that were budgeted fall short of the overhead costs that were actually incurred.