Bridges and Lloyd, an accounting firm, provides consulting and tax planning services. For many years, the firm's total administrative cost (currently $250,000) has been allocated to services on the basis of billable hours to clients. A recent analysis found that 65% of the firm's billable hours to clients resulted from tax planning services, while 35% resulted from consulting services. The firm, contemplating a change to activity-based costing, has identified three components of administrative cost, as follows: Staff Support$180,000 In-house computing charges 50,000 Miscellaneous office costs 20,000 Total$250,000 A recent analysis of staff support found a strong correlation between the number of staff personnel and the number of clients served (consulting, 20; tax planning,
60). In contrast, in-house computing and miscellaneous office cost varied directly with the number of computer hours logged and number of client transactions, respectively. Consulting consumed 30% of the firm's computer hours and had 20% of the total client transactions.If Bridges and Lloyd switched from its current accounting method to an activity-based costing system, the amount of administrative cost chargeable to consulting services would:
A. decrease by $32,500.
B. decrease by $23,500.
C. increase by $23,500.
D. change by an amount other than those listed.
E. change, but the amount cannot be determined based on the information presented.
Answer: B
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Gary and Laura decided to liquidate their jointly owned corporation, Amelia, Inc. After liquidating its remaining inventory and paying off its remaining liabilities, Amelia had the following tax accounting balance sheet. Adjusted basis FMV AppreciationCash$100,000 $100,000 Building150,000 200,000 50,000Land50,000 120,000 70,000Total$300,000 $420,000 $120,000 Under the terms of the agreement, Gary will receive the $100,000 cash in exchange for his interest in Amelia. Gary's tax basis in his Amelia stock is $30,000. Laura will receive the building and land in exchange for her interest in Amelia. Laura's tax basis in her Amelia stock is $60,000.What amount of gain or loss does Gary recognize in the complete liquidation?
What will be an ideal response?