On May 18 of Last Year,Carter Sells Unlisted Stock with a Cost

question 42

Multiple Choice

On May 18 of last year,Carter sells unlisted stock with a cost of $24,000 for $60,000.Carter collects $20,000 initially and is scheduled to receive $10,000 each year for four years starting this year plus an acceptable rate of interest.After receiving the first $10,000 scheduled installment payment,Carter is unable to collect any further payments.After incurring legal fees of $1,000,Carter recovers a portion of the stock valued at $26,000.As a result of the repossession,Carter must report

• A)ordinary income of $9,000.
• B)capital gain of $9,000.
• C)ordinary income of $13,000.
• D)capital gain of $13,000.

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Definitions:

Low-value Customers

Customers who contribute minimally to a company's profitability, often requiring more resources than they generate in revenue.

Arbitrage

The practice of buying and selling assets in different markets or forms to profit from differing prices for the same asset.

Predatory Pricing

A strategy where a firm sets prices below cost with the intention of driving competitors out of the market, and then possibly raising prices to higher levels once competition is reduced.

Mark-up Pricing

A pricing strategy where a fixed percentage is added to the cost of producing a good or service to determine its selling price.