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Nata [24]
3 years ago
11

A, B and C form X Corporation by transferring the following assets, each of which has been held long-term:

Business
1 answer:
natita [175]3 years ago
8 0

Answer:

Part (a)

For every business, the most important consideration for any non-cash asset contribution is its fair market value. The importance of assets is to generate financial results in future, where the adjusted basis cannot do this. On the contrary, the shareholders are more interested in the basis recognized from such assets as this informs their share of potential profits.

While the value of stocks and cash each contributor received equals to the fair market value of their contributions. it exceeds the amount of their individual adjusted bases held in the assets contributed. This is a gain on the part of the contributing shareholder, hence must be recognized as such.

The calculation of values received can be determined as under.

A)

Common Stock = $15,000 (15)  

Preferred Stock= $5000 (100)  

Cash = $2,000

Total = $22,000  

B)  

Common Stock = $15,000 (15)  

Cash = $15,000

Total = $30,000  

C)  

Common Stock = $10,000 (15)  

Cash = $5,000

X's Note = $35,000

Total = $50,000  

As such A, B and C should recognize financial gains amounting $7,000, $10,000 and $30,000 respective y. As this gain benefits the individual contributors, X Corporation should recognized and amortize the sum of these gains over a decided period of time. The amount of loss would thus be $47,000.

 

Part (b)

The amount of the basis would have been considered under the installment method where the company would only recognize the income earned for any taxable year as a proportion of the payment in the year in which the gross profit realized or to be realized bears to the total price of the property transfer contract.

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4 0
3 years ago
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inventory Turnover and Days' Sales in Inventory The following financial statement data for years ending December 31 for Holland
Varvara68 [4.7K]

Answer:

                                            Year 2014           Year 2013

a) Inventory Turnover ratio 3.4 times  and   3.1 times

b) Number of days' sales in inventory 107.3 days and  117.7 days

Explanation:

As per the data given in the question,

As we know that

Inventory turnover ratio = Cost of goods sold ÷ Average inventory

where,

Average inventory

= (Beginning inventory + ending inventory) ÷ 2

For Year 20Y4 :

Average inventory = ($359,160 + $516,840 ) ÷2

= $438,000

And, the cost of goods sold is $1,489,200

So,

Inventory Turnover ratio

= $1,489,200 ÷ $438,000

= 3.4 times

For Year 20Y3 :

Average inventory = ($251,120 + $359,160) ÷ 2

= $305,140

And, the cost of goods sold is $945,934

So,

Inventory Turnover ratio

= $945,934 ÷ $305,140

= 3.1 times

Now

Number of days' sales in inventory = Number of days in a year ÷ Inventory Turnover ratio

For 20Y4

= 365 days ÷ 3.4

= 107.3 days

For 20Y3

= 365 days ÷ 3.1

= 117.7 days

Basically we applied the above formulas

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Answer:

d. substitution bias.

Explanation:

Price changes from year to year are not proportional, and consumers respond to these changes by altering their spending patterns. The problem this creates for inflation calculations is called substitution bias.

A problem with the Consumer Price Index (CPI) arises from the singular fact that, when the price level of a product becomes relatively less expensive or lower, consumers tend to buy more quantity of the product and consequently, a lesser quantity of goods that are relatively more expensive.

Hence, their spending pattern changes with respect to the prices but it's not completely adjusted with the Consumer Price Index (CPI), thus, making the inflation rate to differ because of the problem of substitution bias.

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The purchase of the rights to use another firm's technology in the scenario is known as outsourcing.

<h3>What is outsourcing?</h3>

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In this case, this experienced when the firms purchase the rights to use another firm's technology.

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