Pedro Borrowed $45,000 to Purchase a Machine

question 2

Multiple Choice

Pedro borrowed $45,000 to purchase a machine.He later borrowed $15,000 using the machine as collateral.Both notes are nonrecourse.Eight years later,the machine has an adjusted basis of zero and two outstanding note balances of $30,000 and $6,000.Pedro sells the machine subject to the two liabilities for $21,000.What is his realized gain or loss?

• A)$0.
• B)$21,000.
• C)$51,000.
• D)$57,000.
• E)None of the above.

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Definitions:

Concepts

Concepts are mental categories that group objects, events, and characteristics on the basis of common properties, enabling individuals to organize and simplify information in the world around them.

Prototypes

The original or most representative example of a category or concept, used as a benchmark to understand or identify subsequent variations or instances.

Algorithms

A set of rules or procedures for solving a problem in a finite number of steps, often used in computing and mathematical calculations.

Heuristics

Simple, efficient rules or strategies, often subconscious, used to make decisions and solve problems quickly, but not always accurately.