Kornek Inc

question 54

Multiple Choice

Kornek Inc. transferred an old asset with a $200,000 adjusted tax basis plus $12,000 cash in exchange for a new asset worth $260,000. Which of the following statements is false?

• A) If the exchange is taxable, Kornek recognizes a $48,000 gain.
• B) If the exchange is nontaxable, Kornek recognizes a $12,000 gain.
• C) If the exchange is nontaxable, Kornek's tax basis in the new asset is $212,000.
• D) None of these statements is false.

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Definitions:

Variable Cost

Costs that change in proportion to changes in the level of production or sales volume.

Cost Volume Profit (CVP) Analysis

A financial analysis tool used to determine how changes in costs and volume affect a company's operating income and net income.

Simplified Model

An abstracted representation of a system that captures essential features while ignoring less relevant details to facilitate analysis and decision-making.

Activity-Based Costing

A pricing approach that discerns various tasks within a business and allocates the expenses of each activity to all goods and services based on their real usage.