Raymond Exchanges a Rental Lake House with an Adjusted Basis

question 8

Multiple Choice

Raymond exchanges a rental lake house with an adjusted basis of $200,000 and fair market value of $320,000 for a rental beach house with a fair market value of $290,000 and $30,000 cash.What are the recognized gain or loss and the basis of the beach house?

• A)$120,000 gain and $320,000 basis.
• B)$0 gain and $230,000 basis.
• C)$30,000 gain and $200,000 basis.
• D)$30,000 gain and $230,000 basis.

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Definitions:

Variable Costing

A financial tracking method that considers just the variable operating costs (direct materials, direct labor, and variable manufacturing overhead) in the pricing of merchandise.

Unit Product Cost

The overall expense incurred to manufacture a single item, encompassing direct materials, direct labor, and overhead costs.

Absorption Costing

Absorption costing is an accounting method that includes all of the manufacturing costs (direct materials, direct labor, and overhead) in the cost of a product.

Variable Costing

An accounting method that only considers variable costs in the cost of goods sold and is used in internal financial analysis.