Noelle Owns an Automobile Which She Uses for Personal Use

question 184

Multiple Choice

Noelle owns an automobile which she uses for personal use.Her adjusted basis is $45,000 (i.e., the original cost) .The car is worth $22,000.Which of the following statements is correct?

• A)If Noelle sells the car for $22,000, her realized loss of $23,000 is not recognized.
• B)If Noelle exchanges the car for another car worth $22,000, her realized loss of $23,000 is not recognized.
• C)If the car is stolen and it is uninsured, Noelle may be able to recognize part of her realized loss of $23,000.
• D)Only a.and b.are correct.
• E)a., b., and c.are correct.

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Definitions:

Retained Earnings

Retained Earnings represent the cumulative amount of net income earned by a company that is reinvested in the business, not distributed to shareholders as dividends.

Cumulative Preferred Stock

A type of preferred stock where dividends accumulate if not paid in a given period and must be paid out before dividends to common stockholders.

Cash Dividend

A payment made by a company out of its earnings to shareholders in the form of cash.

Market Price

The current rate for transactions involving a service or asset.