Garth Corporation Donates Inventory Having an Adjusted Basis of $40,000

question 84

Multiple Choice

Garth Corporation donates inventory having an adjusted basis of $40,000 and an FMV of $150,000 to a qualified public charity. The inventory will be used by the charity to care for the ill. The maximum charitable contribution deduction before consideration of the 10% limitation is

• A)$40,000.
• B)$55,000.
• C)$80,000.
• D)$95,000.

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Definitions:

Cash Break-Even

The point at which a business's cash inflows exactly match its cash outflows, exclusive of financing, indicating no net cash gain or loss.

Straight-Line Depreciation

A tactic for apportioning the cost of a physical asset over its effective lifespan in identical yearly expenditures.

Fixed Costs

Expenses that do not change with the level of goods or services produced over a short period.

Operating Cash Flow

A measure of the amount of cash generated by a company's normal business operations, indicating whether a company can generate sufficient positive cash flow to maintain and grow its operations.