Homework Answers
In all 3 cases basis of land will be $10,000
Note:- You use the full purchase price as your starting point, regardless of how you pay for the property—with cash or a loan. If you buy property and take over an existing mortgage, you use the amount you pay for the property, plus the amount that still must be paid on the mortgage.
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1. Joe buys a piece of land on January 3rd of the current year. He pays...
1. Joe buys a piece of land on January 3rd of the current year. He pays$10,000...
1. Joe buys a piece of land on January 3rd of the current year. He pays$10,000 in cash. What is Joe’s basis in the land? 2. Suppose Joe gives the seller $7,000 in cash and a note for $3,000 paying interest at the current rate of 3%. What is Joe’s basis in the land? 3. Suppose instead that Joe gives the seller $6,000 in cash, a note with interest, promising to pay $3,000 in one year, and a piece of...
4. Assume Joe's basis in the land is $10,000. At the end of the year the...
4. Assume Joe's basis in the land is $10,000. At the end of the year the land is now worth $14,000. Does Joe realize income on that date? 5. Suppose the following year Joe's sells the land which is not subject to a mortgage. Joe receives $15,000 in cash. Does Joe realize a gain or loss on the transaction and if so, how much is it? 6. Suppose instead the land is subject to a mortgage of $3,000 and Joe...
Tom has a piece of land that is worth $200,000. His basis in the land is $100,000. Tom contributes the land and forms a partnership with a couple of his college schoolmates, Jim and Joe. Jim contribu...
Tom has a piece of land that is worth $200,000. His basis in the land is $100,000. Tom contributes the land and forms a partnership with a couple of his college schoolmates, Jim and Joe. Jim contributes cash of $100,000, and Joe contributes services worth $100,000 to the partnership. Tom will be a 50% partner and Jim and Joe will each be 25% partners, what is Tom's basis in his partnership interest? 26 a $25,000 b $50,000 c $200,000 d...
Adjusted Basis, Initial Basis (LO. 3, 5) Florian Corporation purchases a piece of land for investment purposes on April...
Adjusted Basis, Initial Basis (LO. 3, 5) Florian Corporation purchases a piece of land for investment purposes on April 1. Florian pays the seller $1,810 cash and agrees to pay the seller $2,800 per year for the next 5 years plus interest at 9% per year on the outstanding balance. As part of the purchase agreement, Florian agrees to pay all property taxes for the year, a total of $340. In addition, Florian pays legal fees of $490 connected with...
11. Isaac buys a piece of land as an investment, paying $20,000. Three years later he...
11. Isaac buys a piece of land as an investment, paying $20,000. Three years later he trades the land to Isadore for a piece of land worth $26,000. Isaac holds the new land as an investment. Does Isaac realize a gain on the swap of the lland, and if so how much gain is realized? 12. Does Isaac recognize a gain on the swap of the land and if so how much is it? 13. What is Isaac's adjusted basis...
1 Assume instead of the above that Aliza purchases a house for $500,000. She pays $200,000...
1 Assume instead of the above that Aliza purchases a house for $500,000. She pays $200,000 in cash and signs a mortgage for $300,000. After living in the house as her principle residence for 2 years, she sells the house for $900,000 in cash add the buyer assumes her mortgage of$200,000. What is a Alizsa’s amount realized on the sale? 2. Does Aliza realize a gain on the sale of her residence, and if so, what is the amount? 3....
Question 2: If you can borrow $100,000 to purchase a piece of land this year and...
Question 2: If you can borrow $100,000 to purchase a piece of land this year and burrow this amount at 5% interest with the anticipation of selling this land for $110,000 at the beginning of next year, what is the present value of the gain made on this transaction if the current lending rate is 3%? Depict the cash flow of each transaction. There are three cash flow transactions: 1) Cash flow from burrowing: 2) Cash flow from investing in...
Question Completion Status: QUESTION 9 1 points Save Brandon buys a piece of equipment for $15,000....
Question Completion Status: QUESTION 9 1 points Save Brandon buys a piece of equipment for $15,000. He pays $5,000 for upgrades in year 1 and the equipment generates $2,000 in cash flow for year 1. In year 2 the equipment generates $8,000, year 3 it generates $4,000, but Brandon sells it for $6,000 but also pays a $500 commission. Assume a required rate of return of 8%, what is the NPV? ○ <3,378>. O 3,378. ○ <2,178>. 2,178. QUESTION 10...
Purchased a parcel of land on March 1, 2019 for $980,000 by paying $470,000 in cash...
Purchased a parcel of land on March 1, 2019 for $980,000 by paying $470,000 in cash and signing a short-term note payable with the seller for $510,000. You must repay the $510,000 in exactly one year on March 1, 2020. You agree to pay the seller 5 percent interest (annual rate) on a quarterly basis (June 1, September 1, December 1, 2019, and March 1, 2020). [Adjusting Entry Required] What is the Adjusted Entry?
X Company must replace one of its current machines with either Machine A or Machine B....
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $52,000, and Machine B costs $60,000. Estimated annual cash flows with the two machines are as follows: Year NM Machine A $ 6,000 8,000 8,000 8,000 6,000 5,000 4,000 Machine B $ 7,000 4,000 3,000 3,000 3,000 2,000 2,000 N If X Company buys Machine B instead of Machine A, what is...
4. Assume Joe's basis in the land is $10,000. At the end of the year the land is now worth $14,000. Does Joe realize income on that date? 5. Suppose the following year Joe's sells the land which is not subject to a mortgage. Joe receives $15,000 in cash. Does Joe realize a gain or loss on the transaction and if so, how much is it? 6. Suppose instead the land is subject to a mortgage of $3,000 and Joe...
Tom has a piece of land that is worth $200,000. His basis in the land is $100,000. Tom contributes the land and forms a partnership with a couple of his college schoolmates, Jim and Joe. Jim contributes cash of $100,000, and Joe contributes services worth $100,000 to the partnership. Tom will be a 50% partner and Jim and Joe will each be 25% partners, what is Tom's basis in his partnership interest? 26 a $25,000 b $50,000 c $200,000 d...
11. Isaac buys a piece of land as an investment, paying $20,000. Three years later he trades the land to Isadore for a piece of land worth $26,000. Isaac holds the new land as an investment. Does Isaac realize a gain on the swap of the lland, and if so how much gain is realized? 12. Does Isaac recognize a gain on the swap of the land and if so how much is it? 13. What is Isaac's adjusted basis...
Question 2: If you can borrow $100,000 to purchase a piece of land this year and burrow this amount at 5% interest with the anticipation of selling this land for $110,000 at the beginning of next year, what is the present value of the gain made on this transaction if the current lending rate is 3%? Depict the cash flow of each transaction. There are three cash flow transactions: 1) Cash flow from burrowing: 2) Cash flow from investing in...
Question Completion Status: QUESTION 9 1 points Save Brandon buys a piece of equipment for $15,000. He pays $5,000 for upgrades in year 1 and the equipment generates $2,000 in cash flow for year 1. In year 2 the equipment generates $8,000, year 3 it generates $4,000, but Brandon sells it for $6,000 but also pays a $500 commission. Assume a required rate of return of 8%, what is the NPV? ○ <3,378>. O 3,378. ○ <2,178>. 2,178. QUESTION 10...
X Company must replace one of its current machines with either Machine A or Machine B. The useful life of both machines is seven years. Machine A costs $52,000, and Machine B costs $60,000. Estimated annual cash flows with the two machines are as follows: Year NM Machine A $ 6,000 8,000 8,000 8,000 6,000 5,000 4,000 Machine B $ 7,000 4,000 3,000 3,000 3,000 2,000 2,000 N If X Company buys Machine B instead of Machine A, what is...
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