Maria meets all of the requirements of § 1237 (subdivided realty). in 2017, she begins selling lots and sells four separate lots to four different purchasers. she also sells two contiguous lots to another purchaser. the sales price of each lot is $30,000. maria’s basis for each lot is $15,000. selling expenses are $500 per lot. what are the realized and recognized gain? explain the nature of the gain (i. e., ordinary income or capital gain). would your answers change if, instead, the lots sold to the fifth purchaser were not contiguous? if so, how?

Powell company began the 2018 accounting period with $40,000 cash, $86,000 inventory, $60,000 common stock, and $66,000 retained earnings. during 2018, powell experienced the following events: sold merchandise costing $58,000 for $99,500 on account to prentise furniture store. delivered the goods to prentise under terms fob destination. freight costs were $900 cash. received returned goods from prentise. the goods cost powell $4,000 and were sold to prentise for $5,900. granted prentise a $3,000 allowance for damaged goods that prentise agreed to keep. collected partial payment of $81,000 cash from accounts receivable. required record the events in a statements model shown below. prepare an income statement, a balance sheet, and a statement of cash flows. why would prentise agree to keep the damaged goods?