Renee Is Single and Has Taxable Income of $480,000 Without

question 138

Multiple Choice

Renee is single and has taxable income of $480,000 without considering the sale of a capital asset (land held for investment) in September of 2017 for $25,000.That asset was purchased six years earlier and has a tax basis of $5,000.The tax liability applicable to only the capital gain (without consideration of the additional Medicare tax) is

• A)$7,920.
• B)$5,600.
• C)$3,000.
• D)$4,000.

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Definitions:

Net Operating Income

The total profit of a company after operating expenses are subtracted, but before taxes and interest are deducted.

Variable Costing

An accounting method that includes only variable costs—direct materials, direct labor, and variable manufacturing overhead—in the cost of goods sold and inventory valuation.

Absorption Costing

A method of accounting in which all costs of manufacturing, both direct and indirect, are treated as product costs, regardless of whether they vary with output level.

Net Operating Income

The total income of a company after deducting operating expenses but before interest and taxes.