Last Year, Lucy Purchased a $100,000 Account Receivable for $90,000

question 86

Multiple Choice

Last year, Lucy purchased a $100,000 account receivable for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected.

• A) $0
• B) $2,000 gain
• C) $3,000 loss
• D) $13,000 loss
• E) None of the above

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Definitions:

Hydraulically

Pertaining to or involving the movement or operation of devices through the pressure of liquids in motion.

Electrically

Pertaining to the use or operation by electricity, involving electronic circuits or devices.

Milky Appearance

Describes a condition where a normally transparent or semi-transparent fluid, like oil or hydraulic fluid, has become cloudy, often due to contamination with water.

Aeration

The blending of a gas into a liquid such as the mixing of air into oil by the churning action of rotating gears.