Jonathon Owns a One-Third Interest in a Liquidating Partnership

question 125

Multiple Choice

Jonathon owns a one-third interest in a liquidating partnership. Immediately before the liquidation, his basis in the partnership interest is $60,000. The partnership distributes cash of $32,000 and two parcels of land (each with a fair market value of $10,000) . Parcel A has a basis of $2,000 to the partnership and Parcel B has a basis of $6,000. Jonathon's basis in the two parcels of land is:

• A) Parcel A, $2,000; Parcel B, $6,000.
• B) Parcel A, $7,000; Parcel B, $21,000.
• C) Parcel A, $10,000; Parcel B, $10,000.
• D) Parcel A, $14,000; Parcel B, $14,000.
• E) Parcel A, $15,000; Parcel B, $45,000.

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Definitions:

Standard Prices

Predetermined prices used in budgeting and cost control procedures for valuing transactions and measuring cost variances.

Direct Materials Quantity Variances

The variance that occurs when the actual quantity of materials used in production differs from the expected quantity.

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.

ABC

A method of identifying and assigning costs to specific activities to improve cost accuracy and managerial decision-making.