Justin and Kevin Formed the Equal JK Partnership During the Current

question 89

True/False

Justin and Kevin formed the equal JK Partnership during the current year, with Justin contributing $60,000 in cash and Kevin contributing land (basis of $40,000, fair market value of $30,000) and equipment (basis of $0, fair market value of $30,000).Kevin recognizes a $20,000 gain on the contribution and his basis in his partnership interest is $60,000.

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Definitions:

Variable Costing

An accounting method that includes only variable costs—costs that change with production levels—in the calculation of cost of goods sold and excludes fixed costs.

Net Operating Income

The total earnings from a company's operations after deducting operating expenses but before interest and taxes.

Net Operating Income

The profit a company makes after deducting operating expenses from gross profit, not including income and expenses from investments and interest.

Variable Costing

An accounting method that only considers variable costs in determining the cost of products.