The Owner of M&N Milling Exchanged a Building Used in His

question 16

Essay

The owner of M&N Milling exchanged a building used in his business for a different building.M&N Milling's basis in the building was $200,000 and the owner still owes $60,000 related to the purchase of the building.The other party to the exchange, M.Grinding, assumed the liability along with the building and transferred a newer and smaller building worth $300,000 to M&N Milling. a. Calcul ate $M \& N$ Milling's
1. Realized gain on the exchange. $\quad$ $\quad$$\$$ _____
2. Recognized gain on the exchange. $\quad$$\$$ _______
b. Calculate the adjusted basis of the newer machine. $\quad$$\$$ ______

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Definitions:

Contribution Margin Ratio

A financial ratio that measures how much of each sale is available to cover fixed costs after variable costs have been paid.

Variable Costs

Charges that fluctuate in relation to the volume of business activities or production levels.

CVP Analysis

Cost-Volume-Profit Analysis, a tool that helps understand the relationship between costs, volume of sales, and profit.

Sales Mix

The combination of products or services a company sells, often analyzed to assess profitability and resource allocation.