28. BC and OP are both private not-for-profitentities. They combine to create LM, a newprivate not-for-profit entity with an entirelynew board of directors. BC holds land witha book value of $300,000 and a fair valueof $400,000. OP holds land with a bookvalue of $500,000 and a fair value of$550,000. After LM has been formed,what is the reported value of the landaccount?a. $800,000b. $850,000c. $900,000d. $950,000

The question is asking for the reported value of the land account after the formation of the new…

Answered: 28. BC and OP are both private…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question 48 Choose the correct answer from the choices.
None
Zhang incorporated her sole proprietorship by transferring inventory, a building, and land to the corporation in return for 100 percent of the corporation’s stock. The property transferred to the corporation had the following fair market values and adjusted bases: FMV Adjusted Basis Inventory $ 60,000 $ 30,000 Building 450,000 300,000 Land 690,000 900,000 Total $ 1,200,000 $ 1,230,000 Assume the corporation assumed a mortgage of $1,300,000 attached to the building and land. Assume the fair market value of the building is now $750,000 and the fair market value of the land is $1,590,000. The fair market value of the stock remains $1,100,000. What is the corporation’s adjusted basis in each of the assets received in the exchange?(Do not round intermediate calculations.)
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(1) DEF Corporation distributes a building to Jones, an individual and fifty (50) percent shareholder. The building has a FMV of $50,000 and an adjusted basis of $32,000. Without considering the distribution of the building to Jones, DEF Corporation had earnings and profits of $26,500. Jones adjusted basis in his interest in DEF Corporation was equal to $15,000. (a) What is the amount of the section 301 distribution to Jones? (b) What is Jones' basis in the building following its distribution to Jones? (c) What is the amount of gain recognized by DEF Corporation as a result of the distribution of the building to Jones? (d) What is the character of the distribution to Jones and what is the amount of DEF's earnings and profits following the distribution?

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