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iogann1982 [59]
3 years ago
5

Comet Company is owned equally by Pat and his sister Pam, each of whom hold 100 shares in the company. Comet redeems 50 of Pam's

shares on December 31, 20X3, for $1,000 per share in a transaction that Pam treats as an exchange for tax purposes. Comet has total E&P of $250,000 on December 31, 20X3. What are the tax consequences to Comet because of the stock redemption?
Business
1 answer:
forsale [732]3 years ago
6 0

Answer:

Comet's E&P will decrease by $50,000 due to the exchange.

Explanation:

50 of Pam's shares are worth 50 x $1,000 = $50,000, since the corporation is redeeming them, it will do so by decreasing its earnings and profits (retained earnings account).

Generally when larger corporations buy back stocks (AKA treasury stocks), they will credit cash and debit treasury stocks, but since Pam's stocks are being retired, they are not going to be held as treasury stocks, therefore E&P must decrease.

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Answer:

A. To create a competitive advantage.

Explanation:

One of the most efficient and effective ways for a company to create a competitive advantage is through the use of technology cycles and innovation streams.

This methods most likely lead to the development of either new products or services, or the improvement of existing products or services, leading to a competitive advtange over competitors, either in terms of price, quality, or both.

8 0
3 years ago
Capital refers to a person's assets<br> True or False
pogonyaev

Answer:

True

Explanation:

4 0
2 years ago
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lara [203]

Answer:

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According to this, the answer is that in the context of the business cycle, Bruslon is most likely going through a period of contraction because there is an economic downturn that forced Loger's to lay off many employees.

8 0
3 years ago
Like many entrepreneurs, troy smith started sonic as a sole proprietorship, then took on a partner, and eventually offered franc
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Second stage: Partnership

The advantage in this scenario was that Troy Smith is now having help with things like and he can focus his attention in improving the business operations while his partner focus primarily on sales. The greatest disadvantage now is that he has to share the profits of the business.  

 

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The business can now continue to grow while maintaining all the same qualities the company was started with. The disadvantage would now be Troy Smith would have limited control over the success of that particular franchise.

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aniked [119]
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