On October 1,Paula Exchanged an Apartment Building (Adjusted Basis of $375,000

question 32

Multiple Choice

On October 1,Paula exchanged an apartment building (adjusted basis of $375,000 and subject to a mortgage of $125,000) for another apartment building owned by Nick (fair market value of $550,000 and subject to a mortgage of $125,000) .The property transfers were made subject to the mortgages.What amount of gain should Paula recognize?

• A)$0
• B)$25,000
• C)$125,000
• D)$175,000
• E)None of these

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Definitions:

FIFO Method

"First in, first out" method; an inventory valuation technique where the costs of the earliest goods acquired are the first to be recognized in cost of goods sold.

Processing Cost

Expenses associated with the operations that convert raw materials into finished products, often used in manufacturing industries.

Equivalent Unit

A measure used in process costing that converts work done on incomplete units into the amount of work needed to complete a standard unit.

Ending Work

This term could refer to the final stages of a work process or project, but without more context, it is not clearly identifiable as a standard key term.