Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security. Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities. Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks. To identify: To identify the difference between the debt security and an equity security.

Question

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Answer 1

Question

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

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JH, Inc., is a calendar year, accrual basis corporation with Joe as its sole shareholder (basis in his stock is $90,000). On January 1 of the current year, JH Corporation has accumulated E & P of $200,000. Before considering the effect of the distribution described below, the corporation’s current E & P is $50,000. On November 1, JH distributes an office building to Joe. The office building has an adjusted basis of $80,000 (fair market value of $100,000) and is subject to a mortgage of $110,000. Assume that the building has been depreciated using the ADS method for both income tax and E & P purposes. What are the tax consequences of the distribution to JH and to Joe? (In your answer, be sure to describe the effects on taxable income for both JH and Joe, the impact of the distribution on JH’s E & P, and Joe’s basis in the building.)

Joe is the sole shareholder of JH Corporation. Joe sold his stock to Ethan on October 31 for $150,000. Joe’s basis in JH stock was $50,000 at the start of the year. JH distributed land to Joe immediately before the sale. JH’s basis in the land was $20,000 (fair market value of $25,000). On December 31, Ethan received a $75,000 cash distribution from JH. During the year, JH has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which of the following statements is true? a. Joe recognizes a $110,000 gain on the sale of his stock. b. Joe recognizes a $100,000 gain on the sale of his stock. c. Ethan receives $5,000 of dividend income.d. Joe receives $20,000 of dividend income. e. None of the above.

Answer 2

Question

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

Answer 6

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.

Conclusion

Thus, the above mentioned are the difference between the debt security and equity security.

Answer 7

Chapter 17, Problem 1Q

To determine

Securities: Securities are the financial assets which are negotiable are issued by the organization and also provide the rights to trade the securities in the financial market. Securities are classified as debt security and equity security.

Debt Security: Debt security is a financial instrument which is issued by the organization and is sold to the investors. Bonds, commercial papers, debentures and government securities are known as debt securities.

Equity Security: An equity security represents the shares of the organization. These shares can be purchased from the organization. It mainly represents the ownership of the organization and also provides the income in the form of dividends. Equity securities are available as common shares, preferred shares and capital stocks.

To identify: To identify the difference between the debt security and an equity security.

Answer 8

Expert Solution & Answer

Explanation of Solution

The basic difference between the debt and equity securities is as follows:

Legal right of the securities: The debt securities are the securities which can be said as the corporate borrowings and these are the company borrows money from investors.

The equity securities are the investments in the organization which provides the right to claim on profits and the resources of an organization. It basically offers an ownership position in the company.

Risk involved: Risk involved in the debt security is less as compared to equity securities.

Equity securities are more risky.

Price fluctuations: Debt security is less volatile as it does not experience more changes in its prices.

Equity security is more volatile as it experiences more changes in its prices.