Albatross Corporation Acquired Land for Investment Purposes in 2003 at a Cost

question 176

Essay

Albatross Corporation acquired land for investment purposes in 2003 at a cost of $100,000.Albatross sold the land to Monty on December 30,2017,and did not elect out of the installment method of accounting.The selling price of the property was $400,000.Monty made a cash down payment of $50,000 on the date of sale and executed a $350,000 note,payable in seven annual installments of $50,000 each plus interest at the rate of 6% per annum.The first installment of $50,000 was due in 2018 which Monty paid,plus interest of $21,000.Discuss the effect of this sale on Albatross's taxable income and its E & P account in 2017 and 2018.

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Definitions:

Production Function

A mathematical representation of the relationship between inputs used in production and the output produced from those inputs.

Inputs

Inputs employed in the manufacturing process, such as workforce, investment, substances, and power.

Marginal Product

The extra output produced when one more unit of input is added, keeping all other inputs constant.

Labor Hours

The total time spent by employees in productive activities, commonly calculated to assess workforce efficiency.