Cowboy Corporation Owns 90% of the Single Class of Stock

question 15

Multiple Choice

Cowboy Corporation owns 90% of the single class of stock in Doggie Corporation. The other 10% is owned by Miguel, an individual. Cowboy's basis in its Doggie Corporation stock is $100,000 and Miguel's basis is $50,000. Doggie Corporation distributes property having an adjusted basis of $150,000 and an FMV of $500,000 to Cowboy Corporation, and $60,000 of money to Miguel as a liquidating distribution. Doggie and Cowboy Corporations must recognize gain of:

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Definitions:

Variable Costing

A costing method that includes only variable manufacturing costs—direct materials, direct labor, and variable manufacturing overhead—in product costs.

Ending Inventory

The total value of all goods available for sale at the end of an accounting period, not yet sold.

Variable Production Costs

Costs that vary directly with the level of production, such as materials, labor, and utilities needed for manufacturing.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed manufacturing overhead) in the cost of a product.