Johnson Inc

question 57

Multiple Choice

Johnson Inc. and C&K Company entered into an exchange of real property. Here is the information for the properties to be exchanged.
Pursuant to the exchange, C&K paid $25,000 cash to Johnson and assumed the mortgage on the Johnson property.
-Compute Johnson's gain recognized on the exchange and its tax basis in the property received from C&K.

• A) $25,000 gain recognized; $593,000 basis in C&K property.
• B) $25,000 gain recognized; $793,000 basis in C&K property.
• C) $225,000 gain recognized; $593,000 basis in C&K property.
• D) None of the choices are correct.

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Definitions:

Adjusted Beta

A measure that adjusts a security's beta (volatility relative to the market) based on its historical performance, to provide a more relevant estimation of its future volatility.

Unadjusted Beta

The beta of a stock calculated directly from historical data, without applying any adjustments for its specific characteristics.

CAPM

The Capital Asset Pricing Model, a theory used to determine the expected return on an investment, factoring in risk and the time value of money.

Risk-free Rate

The return on an investment with zero risk, typically represented by the yield on government securities.