Courtney Is Interested in Purchasing the Matrix Company IIf Courtney Buys the Stock of the Matrix for $225,000,the

question 57

Multiple Choice

Courtney is interested in purchasing The Matrix Company.Matrix's assets are:
$\begin{array}{lcc}& {\text { Adjusted Basis }}& {\text { Fair Market Value } }\\\text { Cash } & \$ 2,300 & \$ 2,300 \\\text { Inventory } & 16,500 & 19,200 \\\text { Equipment } & 13,000 & 9,000 \\\text { Land } & 25,000 & 40,500 \\\text { Building } & 66,600 & \$ 129,000 \\\text { Totals } & \underline {\$ 123,400} & \underline { \$ 200,000}\end{array}$
I.If Courtney buys the stock of The Matrix for $225,000,the total basis in the assets will be $200,000.
II.If Courtney pays Matrix $240,000 for the Matrix assets,Courtney's total basis in all of the assets of the business will be $123,400.

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

Recognize the benefits and limitations of activity-based costing.

Apply activity-based costing to various scenarios, including manufacturing and service industries.

Understand the role of cost drivers in ABC and how to select appropriate cost drivers for cost allocation.

Analyze the impact of overhead costs on product costing and how ABC addresses this issue.

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Definitions:

Economic Inefficiency

A situation where resources are not allocated optimally, leading to waste or a failure to achieve potential output or welfare.

Indian Removal

A 19th-century policy of the United States government aimed at relocating Native American tribes from their ancestral lands in the eastern U.S. to territories west of the Mississippi River.

Colonization

The act of establishing control over the indigenous people of an area and exploiting it economically, often involving the settlement of one's own citizens into the territory.