All of the Following Transactions Are Exempt from Rules Regarding

question 1199

Multiple Choice

All of the following transactions are exempt from rules regarding imputed interest with the exception of

• A) taxpayer purchases newly issued bond for $700 (face value of $1,000).
• B) taxpayer sells his home gym equipment for $2,800 with payment due in one year and no stated interest.
• C) taxpayer purchases a sailboat costing $2,500 for weekend boating trips; the full price payable in five months and no stated interest.
• D) taxpayer sells land for $135,000 with payment due in 5 years and no stated interest.

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Definitions:

Expense Recognition

The accounting principle that expenses should be recorded in the period in which they are incurred, regardless of when the cash is paid.

Assets

Resources owned by a business.

Liabilities

Financial obligations or debts a company owes to others, which must be settled over time by transfer of economic benefits.

Accumulated Depreciation

The total amount of depreciation expense charged against an asset over its useful life, reducing its book value.