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.a. How many shares should Mr. Beaver and Ms. Duck each receive?Beaver __________Duck __________b. Compute Mr. Beaver’s realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BD common shares.Beaver realized gain ______________Beaver recognized gain ___________Beaver’s basis in BD stock _________c. Compute Ms. Duck’s realized and recognized gain on her exchange of services for stock, and determine her tax basis in her BD common shares.Duck realized gain ______________Duck recognized gain ___________Duck’s basis in BD stock _________

Shareholders are the individuals who own shares in an entity. They can be preference shareholders or…

Answered: Mr. Beaver and Ms. Duck decide to form…

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. 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.

a. How many shares should Mr. Beaver and Ms. Duck each receive?

1. Beaver __________
2. Duck __________

b. Compute Mr. Beaver’s realized and recognized gain on his exchange of property for stock, and determine his tax basis in his BD common shares.

1. Beaver realized gain ______________
2. Beaver recognized gain ___________
3. Beaver’s basis in BD stock _________

c. Compute Ms. Duck’s realized and recognized gain on her exchange of services for stock, and determine her tax basis in her BD common shares.

1. Duck realized gain ______________
2. Duck recognized gain ___________
3. Duck’s basis in BD stock _________

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