Daniela Is a 25percent Partner in the JRD Partnership

question 43

Multiple Choice

Daniela is a 25percent partner in the JRD Partnership. On January 1, JRD makes a proportionate distribution of $16,000 cash, inventory with a $16,000 fair value (inside basis $8,000) , and accounts receivable with a fair value of $8,000 (inside basis of $0) to Daniela. JRD has no liabilities at the date of the distribution. Daniela's basis in her JRD Partnership interest is $21,000. What is Daniela's basis in the distributed inventory and accounts receivable?

• A)$8,000 inventory, $0 accounts receivable.
• B)$6,000 inventory, $1,000 accounts receivable.
• C)$5,000 inventory, $0 accounts receivable.
• D)$16,000 inventory, $8,000 accounts receivable.

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Definitions:

Activity-Based Costing

A financial methodology that calculates the cost of products and services by identifying activities related to production and assigning costs to each product accordingly.

Direct Labor-Hours

The total number of hours worked by employees directly involved in the manufacturing process.

Direct Materials Cost

The cost of raw materials that can be directly attributed to the production of a finished good.

Activity-Based Costing

A costing methodology that assigns overhead and indirect costs to specific products or activities based on their consumption of resources.