V Is to Perform Services in Exchange for a 20

question 49

Multiple Choice

V is to perform services in exchange for a 20 percent capital interest in a partnership.Both the services and the capital interest are valued at $30,000.However, the agreement between V and the partnership states that the capital interest is forfeited if V violates any part of the service contract during the next five years.V believes the market value of the interest at the end of the fifth year will be $70,000.(Assume this $70,000 value is accurate when choosing among the answers below.) V has a choice of recognizing

• A)$0 now or $70,000 at the end of the fifth year
• B)$30,000 now or $40,000 at the end of the fifth year
• C)$70,000 now or $0 at the end of the fifth year
• D)$0 now or $70,000 when the capital interest is sold
• E)None of the above

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