When a Liquidating Corporation Pays Off an Unsecured Debt Obligation

question 98

Multiple Choice

When a liquidating corporation pays off an unsecured debt obligation,

• A)the corporation recognizes no gain or loss if it uses appreciated property.
• B)the corporation recognizes no gain or loss if it uses cash.
• C)the corporation recognizes any gains but not losses realized.
• D)the corporation recognizes losses but not gains realized.

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Definitions:

Predetermined Overhead Rate

An estimated overhead rate used to allocate manufacturing overhead costs to products or job orders, based on a selected activity base.

Casting Department

A department within a manufacturing facility where molten materials are poured into molds to create product components.

Machine-Hours

Machine-hours are a measure of the amount of time machines are in operation, used to allocate manufacturing overhead costs in cost accounting.

Departmental Predetermined Rates

are overhead rates calculated for each department based on estimated costs and activity, used to allocate manufacturing overhead more accurately.