Two Months Ago, Dawes Inc

question 81

Multiple Choice

Two months ago, Dawes Inc. broke a multi-year lease on office space that it had occupied for four years. Three years ago, Dawes paid $85,300 to install carpeting and new electrical fixtures throughout the office. Accumulated depreciation through the date that Dawes vacated the office was $51,000. What is the tax consequence of Dawes' abandonment of the carpeting and fixtures?

• A) Dawes has no tax consequence because it did not sell or exchange these assets.
• B) $34,300 capital loss.
• C) $34,300 ordinary loss.
• D) $34,300 Section 1231 loss.

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Definitions:

Activity-Based Costing

A system of costing that divides overhead and indirect costs among products and services based on the activities they perform.

Matching Capacity

The process of adjusting the production capability of a company to meet the actual demand for its products or services.

Activity-Based Costing

An approach to cost accounting that allocates overhead and indirect costs to products and services in relation to the activities required.

Resource Consumption

The amount of resources used by a company or process, which could include materials, energy, or labor.