The PW Partnership's Balance Sheet Includes the Following Assets Immediately

question 88

Multiple Choice

The PW partnership's balance sheet includes the following assets immediately before it liquidates:
In complete liquidation PW distributes the cash to Pamela and the unrealized receivables to Wade (equal partners) . Pamela and Wade each have an outside basis in PW equal to $5,000. PW has no liabilities at the time of the liquidation. What is the amount and character of Pamela's recognized gain or loss?

• A)$0
• B)$5,000 capital gain
• C)$5,000 ordinary income
• D)$2,500 capital gain and $2,500 ordinary income

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Definitions:

Bank Reconciliation

The process of comparing and matching figures from the accounting records against those shown on a bank statement.

Deposit In Transit

Funds that have been received and recorded by a company but not yet reflected in its bank statement, usually due to timing differences.

Bank Reconciliation

The method of aligning the figures in a company's financial records for a cash account with the related data on a bank statement.

NSF Check

A check that cannot be processed because the account it is drawn on does not have enough funds.