In 2018, Liam Invested $100,000 for a 25% Interest in a Partnership

question 110

Multiple Choice

In 2018, Liam invested $100,000 for a 25% interest in a partnership involved in an activity in which he is a material participant. The partnership reported losses of $340,000 in 2018 and $180,000 in 2019 with Liam's share being $85,000 in 2018 and $45,000 in 2019. How much of the losses can Liam deduct?

• A) $0 in 2018, $0 in 2019.
• B) $85,000 in 2018, $0 in 2019.
• C) $85,000 in 2018, $15,000 in 2019.
• D) $85,000 in 2018, $45,000 in 2019.
• E) None of the above.

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Definitions:

Weighted-Average Method

An inventory costing method that assigns a cost to inventory on the basis of the average cost of all similar items in inventory, weighted by the quantity of each item.

Direct Materials Cost

The cost of raw materials and components that go directly into the production of a product.

Work In Process Inventory

The value of all the materials, labor, and overhead costs for products that are partially completed by a company.

Equivalent Unit

A measure used in cost accounting to express the amount of work done on units of production during a period, considering partially completed units.