The XYZ Partnership owns the following assets on December 31: By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

Question

The XYZ Partnership owns the following assets on December 31:  By how much must XYZ reduce its unrealized receivables to avoid meeting the substantially appreciated inventory test?

Quizplus · Accepted Answer

To avoid meeting the substantially appreciated inventory test, XYZ must reduce its unrealized receivables by $14,000 ($45,000 - $31,000 = $14,000). This is because the total unrealized receivables ($45,000) minus the inventory ($31,000) equals $14,000, which is the maximum amount that can be reduced without meeting the test. Option D is incorrect because reducing the unrealized receivables is necessary to avoid meeting the substantially appreciated inventory test.

The XYZ Partnership Owns the Following Assets on December 31