Wallace Owns a Construction Company That Builds Both Commercial and Residential

question 63

Multiple Choice

Wallace owns a construction company that builds both commercial and residential buildings. He contracts to build a residential building for $800,000 for which he is eligible to use the completed contract method of accounting. In the current year for regular income tax purposes, Wallace does not recognize any income on the contract. Under the percentage of complete method, the income recognized under the contract would have been $60,000. Wallace's AMT adjustment is:

• A)$0.
• B)$60,000 negative adjustment.
• C)$60,000 positive adjustment.
• D)$800,000 positive adjustment.
• E)None of the above.

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Definitions:

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, allowing for competition based on quality, price, and brand.

Oligopoly

An oligopoly is a market structure in which a few firms dominate the industry, leading to limited competition.

Average Total Cost

Total cost divided by the quantity of output

Marginal Cost

Additional costs associated with the production of one more unit of a product or service.