Last Year, Lucy Purchased a $100,000 Account Receivable for $90,000

question 86

Multiple Choice

Last year, Lucy purchased a $100,000 account receivable for $90,000. During the current year, Lucy collected $97,000 on the account. What are the tax consequences to Lucy associated with the collection of the account receivable? No subsequent collections are expected.

• A) $0
• B) $2,000 gain
• C) $3,000 loss
• D) $13,000 loss
• E) None of the above

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Definitions:

Income

Earnings received from various sources, including employment, investments, and business activities.

Record The Income

This process involves documenting all revenue or income received by an individual or business for accounting and tax reporting purposes.

Repair

Costs incurred to restore an asset to its previous working condition or to maintain its current operating condition without improving it.

Payment

The transfer of money or goods from one party to another as an exchange for goods, services, or to fulfill a legal obligation.