Mr Weller and the Olson Partnership Entered into an Exchange

question 96

Multiple Choice

Mr. Weller and the Olson Partnership entered into an exchange of investment real property. Mr. Weller's property was subject to a $428,000 mortgage, which Olson assumed. Olson's property was subject to a $235,000 mortgage, which Mr. Weller assumed. Which of the following statements is true?

• A) Mr. Weller received $193,000 boot; Olson paid $193,000 boot.
• B) Mr. Weller paid $193,000 boot; Olson received $193,000 boot.
• C) Mr. Weller received $428,000 boot; Olson received $235,000 boot.
• D) Mr. Weller paid $428,000 boot; Olson paid $235,000 boot.

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Definitions:

Net Present Value

A method used to evaluate the profitability of an investment, calculating the difference between the present value of cash inflows and outflows over a period.

Discount Rate

The interest rate used in discounted cash flow (DCF) analyses to determine the present value of future cash flows.

Payback Period

The period needed to recoup the expenses of an investment.

Scrap Value

The estimated residual value of a fixed asset at the end of its useful life, often considered when calculating depreciation.