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Allie forms Broadbill Corporation by transferring land (basis of $125,000, fair market value of $775,000), which is subject to a mortgage of $375,000. One month prior to incorporating Btroadbill, Allie borrows $100,000 for personal reasons and gives the lender a second mortgage on the land. Broadbill Corporation issues stock worth $300,000 to Allie and assumes the mortgages on the land.a. What are the tax consequences to Allie and to Broadbill Corporation?b. How would the tax consequences to Allie differ if she had not borrowed the $100,000?Red Corporation wants to set up a manufacturing facility in a Midwestern state. After considerable negotiations with a small town in Ohio, Red accepts the following offer: land (fair market value of $3 million) and cash of $1 million.a. How much gain or income, if any, must Red Corporation recognize?b. What basis will Red Corporation have in the land?c. Within one year of the contribution, Red constructs a building for $800,000 and purchases inventory for $200,000. What basis will Red Corporation have in each of those assets?
Frank, Cora, and Mitch are equal shareholders in Purple Corporation. The corporation's assets have a tax basis of $50,000 and a fair market value of $600,000. In the current year, Frank and Cora each loan Purple Corporation $150,000. The notes to Frank and Cora bear interest of 8% per annum. Mitch leases equipment to Purple Corporation for an annual rental of $12,000. Discuss whether the shareholder loans from Frank and Cora might be reclassified as equity. Consider in your discussion whether Purple Corporation has an acceptable debt-equity ratio.
UTILITY OF BREAK EVEN POINT IN MANAGERIAL DECISION MAKING 1. It assists in determination of sales mix 2. It assists in exploring new markets 3. It assists in deciding abo
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The follow data relates ot year 20XX for Plano Manufacturing Company: Units produced - 2,000 Units sold - 1,800 Selling price - $200 / per unit Direct material costs - $80,000 Dire
Advantages and Disadvantages of Uniform Costing Advantages 1. It enables costs to be compared simply 2. It makes it easier to computerize the accounting system of d
Reconciliation of Profits Reconciliation of profits disclosed by Financial Accounts and Costing Accounts in an interlocking system, While interlocking cost accounting system
Example of Labour Remuneration Beneath a premium bonus scheme, workers obtained a guaranteed basic hourly minimum rate of pay in addition of a bonus of 50 percent of the time
Direct Labour Efficiency Variances It is the difference between the standard hours allowed for the actual production achieved and the hours actually worked, all valued at THE
1.What is a Statement of Cash Flows? How does it differ from an Income Statement? 2.What unique information does the Statement of Cash Flows deliver to investors? Why do they care?
Brandywine Homecare, a not-for-profit business, had revenues of $12 million in 2011. Expenses other than depreciation totaled 75 percent of revenues, and depreciation expense was $
The Integrated Management Project is to be based on an organisation, a strategic business unit, or profit centre that has good potential for growth and development. The brief is to
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