Answered: Compute Mr. Boyd's realized and…

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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Mr. Boyd and Ms. Tuck decide to form a new corporation named BT Inc. Mr. Boyd 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. Tuck drafts the legal documents and designs the accounting system for B, valued at $20,000. BT issues 1,000 shares of common stock to its two shareholders. 1. Compute Mr. Boyd's realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BT common shares.

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Step 1

Given in the question:
Contribution by Mr. Boyd
	Fair Market Value	Adjusted Tax Basis
Cash	20000
Equipment	40000	41500
Business Inventory	20000	12000
Contribution by Ms. Tuck
Accounting system	20000
BT Corporation Issued	1000	shares

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