Gain Deferral Is Fundamental to the Nonrecognition Transactions

question 52

Multiple Choice

Gain deferral is fundamental to the nonrecognition transactions. In which of the following is gain deferral mandatory?
I.Involuntary conversion of business real estate.
II.Like-kind exchange of business real estate.
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• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

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Definitions:

Overhead-Applied Account

Refers to an account where the applied (estimated) manufacturing overhead costs are accumulated.

Application of Overhead

The application of overhead involves allocating manufacturing overhead costs to produced goods based on a predetermined formula or rate.

Manufacturing Overhead Costs

Indirect costs related to manufacturing that cannot be directly attributed to specific products, including costs such as factory rent and utilities.

Machine Hours

A measure of the operating time of machines or equipment, used in allocating manufacturing costs based on usage.