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Never in the question does it explain that a dollar for dollar reduction upon the 50,000 residual based failure of a collection of AR. Are we just supposed to know that? Seem, unclear at best. If you read the question. I would seem the total 50,000 would be forfeited. I guess my concern is too often in these CPA questions there are assumptions made that the reader understand exactly what the question is asking but, like this example, it was not as clear at it may seem.
I thought the new partners had to control 80% or more for contributions to a partnership to be nontaxable. Since this one doesn't qualify, I thought the basis for the new partner would be the fair value (minus liability taken on by other partners).
If you plug in some numbers for the calculations. Let's say Beginning Inventory was initially $200,000 and they purchased $80,000 and had Ending Inventory of $20,000. That would make the year 2 Ending be the $260,000 in the problem. If $18,000 was missed in the count for year one that would change the $200,000 to $218,000 and if $7,000 was counted twice, it would make the corrected ending inventory $13,000. With the new numbers, $218,000 + $80,000 - $13,000 = $285,000. But the listed answer is $235,000. Is this question wrong or am I missing something.