Eileen Transfers Property Worth $200,000 (Basis of $190,000) to Goldfinch

question 64

Multiple Choice

Eileen transfers property worth $200,000 (basis of $190,000) to Goldfinch Corporation. In return, she receives 80% of the stock in Goldfinch Corporation (fair market value of $180,000) and a long-term note (fair market value of $20,000) executed by Goldfinch and made payable to Eileen. Eileen recognizes gain on the transfer of:

• A) $0.
• B) $10,000.
• C) $20,000.
• D) $190,000.
• E) None of the above.

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Definitions:

Direct Labor

The labor cost associated with workers who are directly involved in the production of goods or the provision of services.

Direct Materials

Raw materials that are directly incorporated into the finished product and can be easily traced to it.

Ideal Standards

Standards that can be achieved only under perfect operating conditions, such as no idle time, no machine breakdowns, and no materials spoilage; also called theoretical standards.

Machine Breakdowns

Unplanned events where machinery or equipment fails to operate, potentially causing disruptions in production and incurred costs for repairs and maintenance.