Wallace Owns a Construction Company That Builds Both Commercial and Residential

question 56

Multiple Choice

Wallace owns a construction company that builds both commercial and residential buildings.He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting.In the current year for regular income tax purposes,Wallace does not recognize any income on the contract.Under the percentage of completion method,the income recognized under the contract would have been $60,000.Wallace's AMT effect is:

• A)$0.
• B)$60,000 negative adjustment.
• C)$60,000 positive adjustment.
• D)$800,000 positive adjustment.

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Definitions:

Indirect Labor

Labor costs not directly tied to the production of goods or services, such as maintenance or administrative staff.

Manufacturing Process

A sequence of operations or steps involved in producing a product, from raw material to finished goods.

Workers

Individuals engaged in physical or mental effort to achieve a purpose or produce something, typically in exchange for wages.

Unspecified Labor

Work or labor contributions that are not clearly defined or categorized within a project or operational activity.