Answered: Book basis of…

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

Mr. Beaver and Ms. Duck decide to form a new corporation named BD Inc. Mr. Beaver transfers $20,000 cash, equipment (FMV $40,000; adjusted tax basis $41,500) and business inventory ($20,000 FMV; adjusted tax basis $12,000), and Ms. Duck drafts the legal documents and designs the accounting and information systems for BD. These services are valued at $10,000. BD issues 1000 shares of common stock to its two shareholders.

d. Determine BD Inc.’s book and tax basis in the inventory and equipment transferred by Mr. Beaver and the book and tax basis of the services (before they are expensed/amortized as organization and startup costs) performed by Ms. Duck.

1. Book basis of inventory____________________________
2. Tax basis of inventory _____________________________
3. Book basis of equipment____________________________
4. Tax basis of equipment______________________________
5. Book basis of organization and startup costs ______________
6. Tax basis of organization and startup costs________________

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