A Taxpayer Purchased a Factory Building in 1985 for $800,000

question 46

Multiple Choice

A taxpayer purchased a factory building in 1985 for $800,000.After claiming ACRS-accelerated depreciation of $800,000,she sells the asset for $1,000,000 during the current year.No payment is received during the current year,and the $1,000,000 balance to be paid with interest at the interest rate in four annual payments beginning one year from date of sale.The installment sales method is adopted.How much ordinary income is recognized in the current year?

• A)$0
• B)$200,000
• C)$800,000
• D)$1,000,000

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting rules and standards that define how transactions and other accounting events should be reported in financial statements. They are designed to be globally consistent to enhance international comparability and quality of financial statements.

Cash Flow Reporting

A financial statement that shows how changes in balance sheet accounts and income affect cash and cash equivalents, breaking the analysis down to operating, investing, and financing activities.

Interest Paid

The amount paid over a period for the use of borrowed funds, typically expressed as an annual percentage of the loan amount.

Dividend

A portion of a company's earnings distributed to its shareholders as determined by the company's board of directors.