Boston School of English Compute the Cost of Purchased Land and A Building MCQs

Question Description

I’m working on a accounting multi-part question and need guidance to help me understand better.

1. Tracy purchased land and a building for $200,000. The appraisal valued the land at $180,000 and the building at $45,000. What amounts should Tracy record as the basis for each asset?
- a. land, $40,000; building, $160,000
- b. land, $160,000; building, $40,000
- c. land, $180,000; building, $45,000
- d. land, $200,000; building, $0
2. Jason sold the building he used in his business for $100,000 cash, a note for $50,000, and the buyer assumed the $75,000 mortgage on the property. What is Jasons amount realized on the transaction?
- a. $100,000
- b. $150,000
- c. $175,000
- d. $225,000
3. Kyle sold a machine used in his business for $10,000. Kyle paid $100,000 for the machine plus $2,000 in transfer taxes and $5,000 to deliver the machine. He has deducted $80,000 of depreciation on the machine. What is Kyles realized gain or loss on the transaction?
- a. loss of $10,000
- b. loss of $15,000
- c. loss of $17,000
- d. loss of $97,000
4. Three years ago, Ed converted his home to a rental property. At the date of conversion, Steves adjusted basis in the home was $200,000, and the FMV was $150,000. After the property was converted to rental use, Ed deducted $21,000 of depreciation on the home. What is the amount of any gain or loss for tax purposes if Ed sells the home for $240,000?
- a. $90,000 gain
- b. $40,000 gain
- c. $61,000 gain
- d. $111,000 gain
5. Ian sold a machine used in his business for $250,000, paying a selling commission of $5,000. The purchaser will make five annual payments of $50,000 starting on the date of sale. In addition, the purchaser will be assessed interest of 6%. Ian paid $150,000 for the machine and has deducted $80,000 of depreciation. If Ian does not elect out of installment sale treatment, what amount should he recognize as Section 1231 gain in year 1?
- a. $15,000
- b. $19,000
- c. $35,000
- d. $175,000

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