Frank and Bob Are Equal Members in Soxy Socks, LLC

question 20

Multiple Choice

Frank and Bob are equal members in Soxy Socks, LLC. When forming the LLC, Frank contributed $50,000 in cash and $50,000 worth of equipment. Frank's adjusted basis in the equipment was $35,000. Bob contributed $50,000 in cash and $50,000 worth of land. Bob's adjusted basis in the land was $30,000. On 3/15/X4, Soxy Socks sells the land Bob contributed for $60,000. How much gain (loss) related to this transaction will Bob report on his X4 return?

• A)$10,000
• B)$15,000
• C)$25,000
• D)$35,000

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Definitions:

Notes Receivable

Claims held by a creditor that are supported by promissory notes, representing a right to receive payments from debtors.

Correcting Entry

An entry made in the accounting records to amend a previously made mistake or incorrect transaction.

Total Assets

The sum of all assets owned by a company, including cash, investments, equipment, and real estate, reflected on the balance sheet.

Adjustments Columns

Columns in an accounting worksheet used for recording adjustments to journal entries at the end of an accounting period before preparing financial statements.