Margaret Moraine Exchanged a Business Auto That Had an Adjusted

question 49

Multiple Choice

Margaret Moraine exchanged a business auto that had an adjusted basis to her of $24,000 with an outstanding liability of $4,000 for a new auto with a fair market value of $22,000. Margaret paid $2,000 in cash and her liability was assumed by the other party. What is Margaret's basis in the new auto?

• A) $18,000
• B) $20,000
• C) $22,000
• D) $24,000
• E) None of the above

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Definitions:

Cost Flow

The manner in which costs move through a firm, from initial acquisition of raw materials to final sale of finished goods.

Single-Step Income Statement

An income statement format that lists all revenues and then deducts all expenses to find the net income with only one subtraction.

Multiple-Step Income Statement

A detailed income statement that separates operational revenue and expenses from non-operational ones, presenting a clear view of a company’s operational efficiency.

Income Statements

A financial statement that shows a company’s revenues, expenses, and profits or losses over a specific period.