Zhao Company Sold an Asset on the First Day of the Tax

question 132

Multiple Choice

Zhao Company sold an asset on the first day of the tax year for $500,000. Zhao's Federal tax basis for the asset was $300,000. Because of differences in cost recovery schedules, the state regular-tax basis in the asset was $350,000. What adjustment, if any, should be made to Zhao's Federal taxable income in determining the correct taxable income for the typical state?

• A) $0
• B) ($50,000)
• C) $50,000
• D) $150,000

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Definitions:

Governmental Fund

A type of fund used by government entities to account for activities that are financed through tax revenue and other governmental resources, focusing on fiscal accountability.

Capital Projects Fund

A fund used by governmental entities to finance major capital outlays, such as buildings, infrastructure, and other significant projects.

Financial Statements

Comprehensive reports that provide information about an organization's financial position, performance, and changes in financial condition.