Richard Exchanges a Building with a Basis of $35,000,and Subject

question 108

Multiple Choice

Richard exchanges a building with a basis of $35,000,and subject to a liability of $25,000,for land with a FMV of $50,000 owned by Bill.Bill takes the building subject to the liability.What is the amount of Richard's realized gain?

• A)$0
• B)$15,000
• C)$25,000
• D)$40,000

Understand the impact of different transactions on the accounting equation.

Analyze the effect of specific business transactions on a company's financial statements.

Calculate total assets, liabilities, and owner's equity using the accounting equation.

Determine the effects of buying and selling assets on a company's financial position.

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Definitions:

Deadweight Loss

The loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.

Competitive Level

The degree of competition within a market, characterized by the number of firms, product differentiation, and barriers to entry.

Producer Net Gains

The total benefits or earnings that producers receive from selling goods or services, over and above their costs of production.

Marginal Revenue

The additional income derived from selling one more unit of a good or service.