Koch Traded Machine 1 for Machine 2

question 40

Multiple Choice

Koch traded machine 1 for machine 2.Koch originally purchased machine 1 for $75,000 and machine 1's adjusted basis was $40,000 at the time of the exchange.Machine 2's seller purchased it for $65,000 and machine 2's adjusted basis was $55,000 at the time of the exchange.What is Koch's adjusted basis in machine 2 after the exchange?

• A)$40,000.
• B)$50,000.
• C)$55,000.
• D)$75,000.
• E)None of thesE.The exchange qualifies as a like-kind exchange.Since no boot was transferred,Koch's basis in the new machine is the basis in its old machine.

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Definitions:

Variable Costs

Variable costs are expenses that change in proportion to the activity or volume of business, such as materials and labor costs.

Fixed Inputs

Resources used in production that cannot be easily increased or decreased in a short period.

Marginal Cost

The cost of producing an additional unit of a good or service.

Average Total Cost

Represents the per-unit total cost of production, calculated by dividing the total cost by the total quantity produced.