Ollie Owns a Personal Use Car for Which He Originally

question 14

Essay

Ollie owns a personal use car for which he originally paid $48,000. He trades the car in on a sports utility vehicle (SUV) paying the automobile dealer cash of $30,000. If the negotiated price of the SUV is $49,000, what is Ollie's recognized gain or loss and his adjusted basis for the SUV?

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Definitions:

Normal Balance

The side of an account (debit or credit) where increases to the account are recorded.

Financial Statement(s)

Documents that provide an overview of a company's financial condition, including income statements, balance sheets, and statements of cash flows.

Permanent/Temporary

Categories of accounts in accounting; permanent accounts are balance sheet accounts that carry their balances throughout multiple accounting periods, while temporary accounts are income statement accounts that are cleared to zero at the end of each accounting period.

Normal Balance

The side (debit or credit) on which increases to the account are recorded, depending on the type of account.