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Tom [10]
3 years ago
15

Sissie owns two items of business equipment. Both were purchased in 2015 for $100,000, both have a 7-year MACRS recovery period,

and both have an adjusted basis of $37,490. Sissie is considering selling these assets in 2019. One of them is worth $60,000, and the other is worth $23,000. Because both items were used in her business, Sissie simply assumes that the loss on one will offset the gain from the other and that the net gain or loss will increase or reduce her business income. What is the amount and character of Sissie’s gain or loss?
Business
1 answer:
MariettaO [177]3 years ago
8 0

Answer:

Sissie must report both operations separately, even though the gain in one of them does offset the loss on the other:

  • selling of equipment A: reported gain (increased ordinary income) of $22,510 ($60,000 - $37,490)
  • selling of equipment B: reported ordinary loss of $14,490 ($23,000 - $37,490)

The effect of both transactions is a net gain of $8,020 that will increase Sissie's ordinary income.

Explanation:

Both assets are § 1231 assets, and § 1245 allows deprecation recapture on the sale of equipment A, so the gain must be considered ordinary income. The loss on the sale of equipment B is a § 1231 loss which must be treated as an ordinary loss.

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_____ 24. Audrey Corporation's cost formula for its selling and administrative expense is $47,900 per month plus $52 per unit. F
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Answer:

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2 years ago
Shawn Company had 130 units in beginning inventory at a total cost of $13,650. The company purchased 260 units at a total cost o
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Answer:

FIFO

cost of the ending inventory = $15,680

cost of goods sold  = $39,570

LIFO

cost of the ending inventory  = $10,290

cost of goods sold  = $44,960

Average Cost Method

cost of the ending inventory = $13,883.37

cost of goods sold  = $41,336.76

Explanation:

The cost of the ending inventory and the cost of goods sold under FIFO, LIFO, and average-cost are calculated as follows :

Step 1 : Determine the Number of units sold

Number of units sold = Total units available for sale - Ending units

                                   = 390 units - 98 units

                                   = 292 units

Step 2 : Determine the Number of units in inventory

Number of units in inventory = 98 units (given)

Step 3 : Use the appropriate principles to calculate required values

<u>FIFO</u>

cost of the ending inventory = 98 x $160 = $15,680

cost of goods sold = 130 units x $105 + 162 units x $160 = $39,570

<u>LIFO</u>

cost of the ending inventory = 98 x $105 = $10,290

cost of goods sold = 260 units x $160 + 32 units x $105 = $44,960

<u>Average Cost Method</u>

Unit Cost = ($13,650 + $41,600) ÷ 390 units = $141.667

therefore,

cost of the ending inventory = 98 x $141.667 = $13,883.37

cost of goods sold = 292 units x $141.667 = $41,336.76

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2 years ago
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