Willie Sells the Following Assets and Realizes the Following Gains

question 13

Multiple Choice

Willie sells the following assets and realizes the following gains (losses) during the current year:
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$$\begin{array} { l r } \text { Personal auto } & \$ ( 5,000 ) \\\text { Municipal bonds } & ( 7,000 ) \\\text { Stamp collection } & 4,000 \\\text { Furniture } & ( 6,000 ) \\1 \% \text { interest in oil well } & ( 8,000 ) \end{array}$$
As a result of these sales, Willie's adjusted gross income will:

• A)Decrease by $3,000.
• B)Decrease by $4,000.
• C)Decrease by $11,000.
• D)Decrease by $15,000.
• E)Not change.

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Definitions:

Fixed Overhead

The portion of a company's fixed costs that are not directly tied to production levels, such as rent and insurance.

LIFO Reserve

The difference between the cost of inventory calculated under the Last-In, First-Out method and the FIFO method.

LIFO

Last-In, First-Out, an inventory management method where the most recently produced or acquired items are sold first.

FIFO

An inventory valuation method that assumes the first items placed in inventory are the first sold, standing for 'First In, First Out'.