rosemarvins12

The income statement for the year 2015 of Fugazi Co. containsthe following information:

The entry to close the expense accounts includes a

Select one:

A. credit to Income Summary for $7,500.

B. debit to Utilities Expense for $2,500.

C. debit to Income Summary for $7,500.

D. debit to Income Summary for $77,500.

NEED ANSWERS ASAP

Question 35

The adjusted trial balance is prepared

3 points

Question 36

The income statement for the current year of Nova Co. containsthe following information:

The entry to close the expense accounts includes a

3 points

Question 37

The final closing entry to be journalized is typically the entrythat closes the

3 points

Question 38

The heading for a post-closing trial balance has a date linethat is similar to the one found on

3 points

Question 39

The step in the accounting cycle that is performed on a periodicbasis (i.e., monthly, quarterly) is

3 points

Question 40

Merriweather Post Pavillion received a $820 check from acustomer for the balance due. The transaction was erroneouslyrecorded as a debit to Cash $280 and a credit to Service Revenue$280. The correcting entry is

Which of the following statements are true about the accountingtransactions? Select all that apply

NEED HELP ASAP

An aging of a company's accounts receivable indicates that$4,000 are estimated to be uncollectible. If Allowance for DoubtfulAccounts has a $1,200 credit balance, the adjustment to record baddebts for the period will require a

An aging company's accounts receivable indicates $10,000 areestimated to be uncollectible. If allowance for doubtful accountshas a $1,100 credit balance, the adjustment to record bad debts forthe period will require a :
a. debit to bad debts expense for $10,000
b. debit to allowance for doubtful accounts for $8,900
c. debit to bad debts expense for $8,900
d. credit to allowance for doubtful accounts for $10,000

1. The aging method of estimating uncollectible accountsmethod is based on the assumption that the longer an accountreceivable remains outstanding, the less likely it is to becollected. This statement is

a. True

b. False

2. Under the allowancemethod the uncollectible accounts expense (i.e. bad debt expense)is

a. estimated and recognized at the end of the accountingperiod.

b. recognized at the time a customer defaults on theiraccount.

c. estimated and recognized at the time a customer makes apurchase.

d. recognized at the beginning of each accounting period.

The contribution margin per unit is the difference between the selling price and the variable cost per unit, and the contribution margin ratio is the ratio of the contribution margin to the selling price per unit. If the selling price and the variable cost per unit both increase 10 percent and fixed costs do not change, what is the effect on the contribution margin per unit and the contribution margin ratio? a. Contribution margin per unit and the contribution margin ratio both remain unchanged. b. Contribution margin per unit and the contribution margin ratio both increase. c. Contribution margin per unit increases and the contribution margin ratio decreases. d. Contribution margin per unit increases and the contribution ratio remains unchanged.

1) The income statement is prepared from

either the adjusted trial balance or the Income Statementcolumns of the end-of-period spreadsheet

the adjusted trial balance

both the adjusted trial balance and the Income Statement columnsof the end-of-period spreadsheet

the Income Statement columns of the end-of-periodspreadsheet

2) Of the following steps of the accounting cycle, which stepshould be completed last?

An adjusted trial balance is prepared.

Transactions are posted to the ledger.

Adjusting entries are journalized and posted to the ledger.

An unadjusted trial balance is prepared.

3) Net income appears on the end-of-period spreadsheet inthe

credit column of the Income Statement columns

debit column of the Balance Sheet columns

debit column of the Income Statement columns

debit column of the Adjustments columns

4) The income statement should be prepared

before the retained earnings statement and balance sheet

after the retained earnings statement and balance sheet

after the retained earnings statement and before the balancesheet

after the balance sheet and before the retained earningsstatement

When there is net income it appears on the worksheet in the:
a. debit column of the Balance Sheet columns.
b.debit column of the adjustments columns.
c. debit column of the Income Statement columns.
d. credit column of the Income Statement columns.

C.Prepare an income statement for Harry's Haberdashery dated December31,2015

Which of the following statements is correct?

A) On the worksheet, the amount of the ending merchandiseinventory is shown in the Income Statement Credit column in theaccount Income Summary and the Balance Sheet Debit column in theaccount Merchandise Inventory.

B) On the worksheet, if debits exceed credits in the AdjustedTrial Balance section, the difference represents a net loss.

C) All of these statements are correct.

D) On the worksheet, the totals of the Income Statement columnsshould equal the totals of the Balance Sheet columns.

The income statement columns on the work sheet show that totaldebits are $28,344 and total credits are $56,383. What does thisinformation mean to the accountant? Select the correct answer. Noneare correct The accounts are out of balance Net loss was $28,039Net income was $28,039

The Income Statement columns in the end-of-period spreadsheet show that debits are equal to $55,800 and credits are $77,520. What does this information mean to the accountant?

33. The income statement for the year 2015 of Fugazi Co. contains the following information:
Revenues $70,000
Expenses:
Salaries and Wages Expense $45,000
Rent Expense 12,000
Advertising Expense 10,000
Supplies Expense 6,000
Utilities Expense 2,500
Insurance Expense 2,000
Total expenses 77,500
Net income (loss) $ (7,500)

After all closing entries have been posted, the revenue account will have a balance of
a. $0.
b. $70,000 credit.
c. $70,000 debit.
d. $7,500 credit.

34. The following information is for Bright Eyes Auto Supplies:
Bright Eyes Auto Supplies
Balance Sheet
December 31, 2015

Cash $ 40,000 Accounts Payable $ 130,000
Prepaid Insurance 80,000 Salaries and Wages Payable 50,000
Accounts Receivable 100,000 Mortgage Payable 150,000
Inventory 140,000 Total Liabilities 330,000
Land Held for Investment 180,000
Land 250,000
Buildings $200,000 Common Stock $400,000
Less Accumulated Retained Earnings 340,000 740,000
Depreciation (60,000) 140,000
Trademark 140,000 Total Liabilities and
Total Assets $1,070,000 Stockholders’ Equity $1,070,000

The total dollar amount of liabilities to be classified as current liabilities is
a. $50,000.
b. $130,000.
c. $180,000.
d. $330,000

The following information is for Bright Eyes Auto Supplies:Bright Eyes Auto Supplies Balance Sheet December 31, 2015 Cash $40,000 Accounts Payable $ 130,000 Prepaid Insurance 80,000 Salariesand Wages Payable 50,000 Accounts Receivable 100,000 MortgagePayable 150,000 Inventory 140,000 Total Liabilities 330,000 LandHeld for Investment 180,000 Land 250,000 Buildings $200,000 CommonStock $400,000 Less Accumulated Retained Earnings 340,000 740,000Depreciation (60,000) 140,000 Trademark 140,000 Total Assets$1,070,000 Total Liabilities and Stockholders’ Equity $1,070,000The total dollar amount of liabilities to be classified as currentliabilities is $180,000. $130,000. $50,000. $330,000.

What is 1+1?

Which one of the following represents the expanded basicaccounting equation? 1) Assets + Owner's Drawings + Expenses =Liabilities + Owner's Capital + Revenues. 2) Assets = Liabilities +Owner's Capital + Owner's Drawings ❝ Revenue ❝ Expenses. 3) Assets= Revenues + Expenses ❝ Liabilities. 4) Assets ❝ Liabilities ❝Owner's Drawings = Owner's Capital + Revenues ❝ Expenses.

Which one of the following could represent the expanded basicaccounting equation?

A. Assets= Liabilities+Owner's Capital+Owner'sDrawings-revenue-expenses

B. Assets+ Owner's drawings + expenses = Liabilities + Owner'scapital + Revenues

C. Assets- Liabilities - Owner's drawings= Owner's capital +revenue-expenses

D. Assets= revenues + expenses - liabilities

1. Which of the following is NOT an assumption ofCost-Volume-Profit analysis?

A. Inventory levels will change as production levels vary.

B. Managers can classify each cost as either variable or fixed,and mixed costs can be broken down into their variable or fixedcomponent.

C. Revenues are linear throughout the relevant range ofvolume.

D. A change in volume is the only factor that affects costs.

2. If the sales price is $20 per unit, the variable cost is $12per unit, total fixed costs is $12,000, and 15,000 units areproduced, the contribution margin per unit is:

A. $20.

B. $12.

C. $9.

D. $8.

3. If the sales price is $60 per unit, the variable cost is $10per unit, total fixed costs is $60,000, and 12,000 units areproduced, the breakeven in units is:

A. 1,200.

B. 1,000.

C. 240.

D. 200.

4. If the sales price is $150 per unit, the variable cost is $90per unit, and total fixed costs is $24,000, the contribution marginratio is:

A. 80%.

B. 60%.

C. 40%.

D. 20%.

5. If the sales price is $150 per unit, the variable cost is $90per unit, and total fixed costs is $24,000, the breakeven in salesdollars is:

A. $15,000.

B. $24,000.

C. $36,000.

D. $60,000.

6. If the sales price is $60 per unit, the variable cost is $36per unit, total fixed costs is $50,000, how many units need to besold if the desired profit is $100,000?

A. 1,000 units

B. 2,500 units

C. 4,100 units

D. 6,250 units

10. Leverage Corporation sells two products: Regular andSupreme. Leverage sells three Regulars for every two Supremes. TheRegular sells for $20 each with variable costs of $11 each, whereasthe Supreme sells for $25 each with variable costs of $15 each. Iffixed costs are $21,000, what is the breakeven point in units?

A. 1,167 units of each

B. 1,050 units of each

C. 1,340 units of Regular and 894 units of Supreme

D. 894 units of Regular and 1,340 units of Supreme

A)

4,000.
4,300.
4,500.
5,000.

B)

$120,000.
$280,000.
$400,000.
$480,000.

C)

30,000 units.
12,000 units.
18,000 units.
42,000 units.

A company's plannedactivity level for next year is expected to be 200,000 machinehours. At this level of activity, the company budgeted thefollowing manufacturing overhead costs:

Variable Fixed

Indirect materials$280,000 Depreciation $120,000

Indirect labor 400,000Taxes 20,000

Factory supplies 40,000Supervision 100,000

A flexible budget preparedat the 160,000 machine hours level of activity would show totalmanufacturing overhead costs of

a. $576,000.

b. $720,000.

c. $768,000.

d. $816,000.

A company developed thefollowing per-unit standards for its product: 2 pounds of directmaterials at $4 per pound. Last month, 1,500 pounds of directmaterials were purchased for $5,700. The direct materials pricevariance for last month was

a. $5,700favorable.

b. $300favorable.

c. $150favorable.

d. $300unfavorable.

A company budgeted unitsales of 204,000 units for January, 2013 and 240,000 units forFebruary, 2013. The company has a policy of having an inventory ofunits on hand at the end of each month equal to 30% of next month'sbudgeted unit sales. If there were 61,200 units of inventory onhand on December 31, 2013, how many units should be produced inJanuary, 2013 in order for the company to meet itsgoals?

a. 214,800 units

b. 204,000 units

c. 193,200 units

d. 276,000 units

In the month of June, adepartment had 20,000 units in beginning work in process that were70% complete. During June, 80,000 units were transferred intoproduction from another department. At the end of June there were10,000 units in ending work in process that were 40% complete.Materials are added at the beginning of the process, whileconversion costs are incurred uniformly throughout the process. Theequivalent units of production for materials for Junewere

a. 90,000 equivalentunits.

b. 100,000 equivalentunits.

c. 104,000 equivalentunits.

d. 80,000 equivalentunits.

Mah, Inc. completed JobNo. B14 during 2013. The job cost sheet listed thefollowing:

Direct materials$55,000

Direct labor$30,000

Manufacturing overheadapplied $20,000

Units produced 3,000units

Units sold 1,800units

How much is the cost ofthe finished goods on hand from this job?

a. $105,000

b. $63,000

c. $42,000

d. $51,000

WORK NEEDS TO BE SHOWN!!!

A company's planned activity level for next year is expected to be 200,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:Variable FixedIndirect materials $280,000 Depreciation $120,000Indirect labor 400,000 Taxes 20,000Factory supplies 40,000 Supervision 100,000A flexible budget prepared at the 160,000 machine hours level of activity would show total manufacturing overhead costs of$816,000.$768,000.$576,000.$720,000.

Is the credit card sales on the internet are handled differently than other credit card sales it is true or false?

It easy to determine an international customer’s financial condition or to take legal action if that customer does not pay. it is true or false?.

Domestic sales are much simpler than international sales it is true or false?

A company’s website must be easy to navigate and safe to use it is true of false?

Selling merchandise to individuals or other businesses within one’s own country is generally referred to as domestic sales it is true or false?

The growth of information technology and trading relationships have made doing business internationally more complex it is true or false?

Internet sales must be done in cash rather than by using a credit card it is true or false?

International sales often specify a letter of credit as the method of payment it is true if false?

1. A is responsible for researching, planning, and recommending software and systems choices to meet an organization’s business requirements. a. network administrator b. network analyst c. system administrator d. systems analyst 2. A oversees the planning and implementation of sophisticated security measures to block unauthorized access but at the same time to allow easy and timely access to authorized users. a. database administrator b. network administrator c. programmer d. systems analyst 3. In most organizations, the chief security officer (CSO) reports to the . a. chief administrative officer (CAO) b. chief information officer (CIO) c. chief information security officer (CISO) d. systems executive officer (SEO) 4. Which of the following is considered a strategic advantage of the first-mover? a. Technological literacy b. Superior brand name c. High market value d. Guaranteed long-term success 5. Which of the following conditions must exist for an information system to be a strategic information system? a. The information system must simply provide information. b. The organization's top management must be involved only during the implementation stage. c. The organization’s information system unit must only work with managers of the same unit. d. The information system must serve an organizational goal. 6. Mostly, customer relationship management (CRM) systems support three areas: , sales, and customer service. a. marketing b. human resources c. manufacturing d. processing HC1041 – IT for Business T3 2015 6 7. The combination of customer relationship management (CRM) and supply chain management (SCM) systems is referred to as _____. a. decision support systems (DSSs) b. enterprise resource planning (ERP) systems c. business intelligence (BI) systems d. geographic information systems (GISs) 8. The process of a group of colleagues meeting and working collaboratively to generate creative solutions and new ideas is known as . a. teleconferencing b. brainstorming c. groupthink d. think tank 9. The CPU and primary memory are usually plugged into a circuit board in the computer case called the a. motherboard b. monitor c. control unit d. multicore processor 10. The is the most important part of any computer. a. external storage b. central processing unit c. monitor d. ROM 11. are the most powerful computers at any given time, but are built especially for assignments that require arithmetic speed. a. Mainframe computers b. Mega-servers c. Supercomputers d. Workstations 12. The is the maximum number of bits that the control unit can fetch from primary memory in one machine cycle. a. pixel b. byte c. data word d. binary limit 13. Locating and fixing programming errors is called . a. compiling b. coding c. assembling d. debugging HC1041 – IT for Business T3 2015 7 14. Which of the following is true of objective-oriented programming languages? a. Operations are linked to the data that they run on. b. They require more code than other languages. c. Data and the operations to manipulate the data are kept separate from each other. d. Their primary emphasis is on the procedure for performing a task. 15. The most popular OOP languages are Java, Visual Basic, and . a.XML b. HTTP c. C++/C# d. HTML 16. Programs designed to perform specific jobs, such as calculating and executing a company’s payroll, are collectively called . a. application-specific software b. general-purpose application software c. packaged software d. utility software 17. The purpose of ____ is to manage computer resources and perform routine tasks that are not specific to any application. a. multimedia software b. production software c. packaged software d. system software 18. A computer network within a building, or a campus of adjacent buildings, is called a . a. MAN (metropolitan area network) b. WAN (wide area network) c. LAN (local area network) d. PAN (personal area network) 19. The most important and pervasive set of protocols for telecommunications and networks today is called . a. NFC b. WPA c. TCP/IP d. CDMA 20. The smallest piece of data is called a . a. field b. record c. query d. character HC1041 – IT for Business T3 2015 8 21. are entered to manipulate data, including adding, deleting, and updating data. a. Foreign keys b. Primary keys c. Queries d. Reports 22. A _______ is the general logical structure in which records are stored within a database and the method used to establish relationships among the records. a. database query b. database model c. database system d. database catalog 23. Every time you download a file from a Web site or attach files to e-mail, you are using a(n) application. a. TCP b. NNTP c. FTP d. POP 24. In the context of B2B trading, online advertising is done mainly in two ways: through ____ and through banners. a. e-mail b. search engines c. spam d. newsgroups 25. is a tool used to translate MS-Word documents to multiple languages. a. Linux b. WordPad c. Unix d. Wordfast 26. Differences in must be considered when integrating information systems internationally, even within the same company. a. standards b. computer brands c. programming languages d. storage availability 27. The three major components of a DSS are a data management module, a model management module, and a(n) _______module. a. network b. inference engine c. dialog d. knowledge base HC1041 – IT for Business T3 2015 9 28. Organizations must use software tools to process data into meaningful information to make useful. a. data warehouses b. information silos c. decision systems d. expert systems 29. The data-mining application that identifies which prospective clients should be included in a mailing or email list to obtain the highest response rate is known as _______. a. trend analysis b. customer churn c. consumer clustering d. direct marketing 30. ___________is a traditional approach to systems development. a. SDLC b. ASD c. DSDM d. RUP

8–29. Multiple Choice Questions
Select the best answer for each of the following questions. Explain the reasons for your selection.
a. LAN is the abbreviation for:
(1) Large Area Network.
(2) Local Area Network.
(3) Longitudinal Analogue Network.
(4) Low Analytical Nets.
b. End user computing is most likely to occur on which of the following types of computers?
(1) Mainframe.
(2) Decision support systems.

(3) Personal computers.
(4) Personal reference assistants.
c. When erroneous data are detected by computer program controls, data may be excluded
from processing and printed on an exception report. The exception report should probably
be reviewed and followed up by the:
(1) Data control group.
(2) System analyst.
(3) Supervisor of IT operations.
(4) Computer programmer.
d. An accounts payable program posted a payable to a vendor not included in the online
vendor master fi le. A control which would prevent this error is a:
(1) Validity check.
(2) Range check.
(3) Limit test.
(4) Control total.
e. When an online real-time (OLRT) IT processing system is in use, internal control can be
strengthened by:
(1) Providing for the separation of duties between data input and error handling operations.
(2) Attaching plastic fi le protection rings to reels of magnetic tape before new data can be
entered on the fi le.
(3) Making a validity check of an identifi cation number before a user can obtain access to
the computer fi les.
(4) Preparing batch totals to provide assurance that fi le updates are made for the entire input.
f. The auditors would most likely be concerned with which of the following controls in a
distributed data processing system?
(1) Hardware controls.
(2) Systems documentation controls.
(3) Access controls.
(4) Disaster recovery controls.
g. The auditors would be least likely to use software to:
(1) Access client data fi les.
(2) Prepare spreadsheets.
(3) Assess computer control risk.
(4) Construct parallel simulations.
h. Auditors often make use of computer programs that perform routine processing functions
such as sorting and merging. These programs are made available by IT companies and
others and are referred to as:
(1) Compiler programs.
(2) Utility programs.
(3) User programs.
(4) Supervisory programs.
i. Which of the following is least likely to be considered by the auditors considering
engagement of an information technology specialist on an audit?
(1) Complexity of the client’s systems and IT controls.
(2) Number of fi nancial institutions at which the client has accounts.
(3) Client’s use of emerging technologies.
(4) Extent of the client’s participation in electronic commerce.
j. Which of the following is an advantage of generalized audit software packages?
(1) They are all written in one identical computer language.
(2) They can be used for audits of clients that use differing computing equipment and fi le
formats.

(3) They have reduced the need for the auditor to study input controls for computerrelated
procedures.
(4) Their use can be substituted for a relatively large part of the required tests of controls.
k. The increased presence of user operated computers in the workplace has resulted in an
increasing number of persons having access to the system. A control that is often used to
prevent unauthorized access to sensitive programs is:
(1) Backup copies of data on diskettes.
(2) User identifi cation passwords.
(3) Input validation checks.
(4) Record counts of the number of input transactions in a batch being processed.
l. An auditor will use the computer test data method in order to gain assurances with respect
to the:
(1) Security of data in a system.
(2) IT system capacity.
(3) Controls contained within a program.
(4) Degree of data entry accuracy for batch input data.

Which of the following statements is true?

1. A company makes two products: tables and chairs. How would a higher than expected variable cost per unit for tables impact a multi-product Cost-Volume-Profit Analysis for this company?

It would increase the weighted-average unit contribution margin.

It would decrease the total break-even units.

It would decrease the break-even units for tables.

It would increase the break-even units for chairs.

2. A company makes two products: tables and chairs. How would a lower than expected fixed cost impact a multi-product Cost-Volume-Profit Analysis for this company?

It would decrease the weighted-average unit contribution margin.

It would increase the total break-even units.

It would decrease the break-even units for tables.

It would increase the break-even units for chairs.

3. A company makes two products: tables and chairs. How would a higher than expected selling price per unit for chairs impact a multi-product Cost-Volume-Profit Analysis for this company?

It would decrease the break-even sales.

It would increase the break-even sales.

It would decrease the sales mix percent for chairs.

It would not change the break-even units for tables.

1 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales INCREASED due to

A a decrease in the total fixed cost.

B a decrease in the variable cost per unit for tables.

C a decrease in the selling price per unit for tables.

D an increase in the selling price per unit for chairs.

2 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even sales DECREASED due to

A an increase in the total fixed cost.

B an increase in the variable cost per unit for tables.

C an increase in the variable cost per unit for chairs.

D an increase in the contribution margin ratio.

3 A company makes two products: tables and chairs. While performing a multi-product Cost-Volume-Profit Analysis for this company, you noticed that break-even units for chairs INCREASED due to

A a decrease in the total fixed cost.

B an increase in the variable cost per unit for tables.

C a decrease in the variable cost per unit for chairs.

D None of the above

4 Which of the following is TRUE about allocating overhead using a volume-based overhead rate?

A You need to know the budgeted overhead and budgeted cost driver to compute the predetermined overhead rate.

B You need to know the budgeted overhead and actual cost driver to compute the predetermined overhead rate.

C You need to know the actual overhead and budgeted cost driver to compute the predetermined overhead rate.

D You need to know the actual overhead and actual cost driver to compute the predetermined overhead rate.

5 As volume increases, what happens to your total variable cost?

A it increases within the relevant range

B it decreases within the relevant range

C it stays constant within the relevant range

D it stays constant between relevant ranges

6 When are fixed costs going to be constant?

A In total between relevant ranges

B In total within the relevant range

C Per unit between relevant ranges

D Per unit within the relevant range

7 Which of the following is FALSE about allocating overhead using activity-based costing overhead rates?

A You need to know the budgeted overhead amount for each activity pool to compute the predetermined overhead rate for that activity.

B You need to know the budgeted cost driver amount for each activity to compute the predetermined overhead rate for that activity.

C You need to know the actual overhead amount for each activity pool to allocate overhead to that activity.

D You need to know the actual cost driver amount for each activity to allocate overhead to that activity.

1. A company makes two products: tables and chairs. How would a lower than expected fixed cost impact a multi-product Cost-Volume-Profit Analysis for this company?

It would decrease the weighted-average unit contribution margin.

It would increase the total break-even units.

It would decrease the break-even units for tables.

It would increase the break-even units for chairs.

2. A company makes two products: tables and chairs. How would a higher than expected selling price per unit for chairs impact a multi-product Cost-Volume-Profit Analysis for this company?

It would decrease the break-even sales.

It would increase the break-even sales.

It would decrease the sales mix percent for chairs.

It would not change the break-even units for tables.

Indicate whether each of the following costs incurred at a manufacturing company is period (P) or product (R) AND variable (V) or fixed (F).

a. Supplies at the factory

b. Depreciation of equipment at the executive office building

c. Factory heating and air conditioning

d. Assembly line worker wages

e. Salaries of top company executives

f. Direct materials used in making the product

g. 2016 property taxes associated with the factory

h. Salaries for sales supervisors

i. Office rent for sales personnel

j. Sales Commissions

1. True (T) or false (F) questions (Total 35 marks with each 5 marks)

(1) A static magnetic field does no work on a charge. ( )

(2) Magnetic field is produced by moving electric charges or currents. ( )

(3) When the electric flux in a Gaussian surface is zero it means that the electric field is equal to zero. ( )

(4) An induced electric field is a conservative field. ( ) 

(5) In a parallel connection in the total capacitance is less than any of the individual capacitances. ( )

(6) The direction of the induced current is given by Lenz's law. ( )

(7) The spacings of the maximum (minimum) interference patterns in the *double-sli..* experiment are equal on a screen. ( )

In general, the basis of property to a corporation in a transferthat qualifies as a nontaxable exchange under section 351 is thebasis in the hands of the transferor shareholder decreased by theamount of any gain recognized on the transfer.

True or False

Green company, a U.S. corporation based in Texas, manufacturesand sells a product which includes some componens made in heDominican Republic. None of Green's income from sales constituteDPGR.

True or False

The related-party loss limitation in a complete liquidationapplies only to distributions of property while the built-in losslimitation can apply to a distribution or sale of property.

True or False

I know the answer for this problem is FALSE, but cannot seem to have a clear understanding of the answer. Please explain as to why it is FALSE with the problem below:

In general, the basis of property to a corporation in a transfer that qualifies as a nontaxable exchange under § 351 is the basis in the hands of the transferor shareholder decreased by the amount of any gain recognized on the transfer

property with a fair market value of $300,000, a basis of $100,000, and liabilities of $75,000 is transferred to a corporation in a section 351 exchange. The transfer of the liabilities was for improper business motives. how much gain must be recognized by the transferor?

a. $50,000

b. $75,000

c. 100,000

d. 200,000

Sue transferred a building to her newly formed corporation, RSTU Inc. The building had an adjusted basis to Sue of $75,000 and a fair market value of $150,000 on the date of the transfer. The building was encumbered by a mortgage of $100,000, which RSTU Inc. assumed. On the same day, and in exchange for the building she transferred to RSTU Inc., Sue received 100 percent of RSTU Inc.’s only class of stock. The fair market value of the stock at the date of transfer was $50,000. How much gain was recognized by Sue as a result of this transaction?

a. 0.

b. $25,000.

c. $50,000.

d. $75,000.