Rosilyn Trades Her Old Business-Use Car with an Adjusted Basis

question 4

Multiple Choice

Rosilyn trades her old business-use car with an adjusted basis of $13,000 and an outstanding loan liability balance of $2,000 for a new business-use car valued at $9,000 plus $3,000 cash from Bob's Auto Sales and Loan Company. Bob assumes Rosilyn's loan balance. How much boot does Rosilyn receive in the transaction?

• A)$- 0 -
• B)$1,000
• C)$2,000
• D)$3,000
• E)$5,000

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Definitions:

Adjusting Entry

A journal entry made in accounting to record changes in revenue and expense accounts in order to match revenues and expenses to the period in which they occurred.

Cash Invested

Money that is put into a business or project with the expectation of generating income or profit.

Accrued Interest

Interest that has accrued but remains unpaid.

Prepaid Insurance

Payments made for insurance services before the coverage period, recorded as an asset initially and expensed over time.