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max2010maxim [7]
3 years ago
10

On June 30, 2013, Blair Industries had outstanding $80 million of 8% convertible bonds that mature on

Business
1 answer:
Amanda [17]3 years ago
6 0

Answer:

B) $8 million.

Explanation:

There are $80 worth of convertible bonds, since half of them were converted to common stocks = $80 million x 50% = $40 million

Common stock = 6 million shares x 50% x $10 (par value) = $30 million

Unamortized balance in bond discount = $4 million x 50% = $2 million

Additional paid-in capital = convertible bonds - common stock - unamortized bond discount = $40 million - $30 million - $2 million = $8 million

June 30, 2013, Bond convertion:

Dr Bonds payable 40,000,000

    Cr Common stock 30 ,000,000

    Cr Discount on bonds payable 2 ,000,000

    Cr Additional paid-in capital in excess of par value 8,000,000

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An economy starts in a long-run equilibrium, but then a severe drought kills crops and dramatically increases the price of food.
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Erica and Brett decide to form their new motorcycle business as an LLC. Each will receive an equal profits (loss) interest by co
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Answer:

$58,500

Explanation:

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1. Determine the contributed capital.

According to the problem statement, Brett provided cash ($ 9,500) and a building (here the value of the adjusted base, $ 39,000, is taken). Therefore, the total contributions are $48,500.

2. Calculate capital increases.

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4. Subtract debts.

The partnership assumes the nonrecourse mortgage (which is computed as a debt) for 44,000. Because this component is not covered entirely by Brett, then this amount must be deducted from his individual tax base.

Therefore:

102,500-44,000=58,500

58,500 is Brett´s outside tax basis in his LLC interest.

On a balance sheet, we can see it as follows:

Particulars                                Amount in $

Cash                                                9,500

+Adjusted basis of the                39,000

building

+50% profit sharing ratio            29,500

+Nonrecourse mortgage               5,000

less adjusted basis

+Remaining mortgage on            19,500

building

TOTAL                                             102,500

-Debt on building                          (44,000)

Outside tax basis                          58,500

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