Periodically Clients Discontinue a Particular Line of Operation by Shutting

question 53

Multiple Choice

Periodically clients discontinue a particular line of operation by shutting down or selling a line of business or a company,which usually occurs over at least several months.In these situations the client is to write down net assets to a best estimate of net realizable value and do which of the following?

• A)recognize a loss.
• B)recognize a gain.
• C)recognize a loss or a gain.
• D)not recognize any gain or loss.

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Definitions:

Deadweight Losses

Economic inefficiencies that occur when the allocation of resources is not optimal, typically due to market imbalances or government interventions.

Tax

A compulsory financial charge or other type of levy imposed on a taxpayer by a governmental organization in order to fund government spending and various public expenditures.

Deadweight Loss

The loss of economic efficiency that occurs when the equilibrium for a good or a service is not achieved or is unattainable, leading to misallocation of resources.

Tax Laws

Regulations governing how taxes are assessed, collected, and managed by government entities, including income, corporate, sales, and property taxes.