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11 October, 17:42

Darla owns a dress shop called Darla's Darling Dresses. During the past year, Darla sold some assets to upgrade her facility. She sold racks and shelving units for $600 cash. In addition to the cash, the buyer gave two mannequins worth a total of $200 to Darla. The racks and shelving units had an original cost of $2,500 and had accumulated depreciation for tax purposes of $2,200. Darla's amount realized on the sale is $ and the adjusted basis in the assets sold is

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  1. 11 October, 17:54
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    Darla's amount realized on the sale is $800

    Adjusted basis in the assets sold is $300

    Producing a realized gain on the sale of $500

    Explanation:

    Amount realized = cash received + FMV of other property + buyer's assumption of seller's liabilities - seller's expenses

    Amount realized = 600 + 200 + 0 - 0

    = $800

    Adjusted basis = initial basis - cost recovery deductions

    Adjusted basis = 2500-2200 = $300

    Gain or loss realized = amount realized - adjusted basis = 800-300

    = $500

    Therefore Darla's amount realized on the sale is $800 and the adjusted basis in the assets sold is $300, producing a realized gain on the sale of $500
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