Question: Parchment Inc is created with the following asset and liability

Parchment, Inc., is created with the following asset and liability contributions. Jake and Fran each receive 100 shares of Parchment common stock.
*The land is subject to a mortgage of $20,000 that Parchment assumes.
a. Prepare a financial accounting balance sheet for Parchment. Discuss the relevance of conduit theory and entity theory in the creation of Parchment.
b. Prepare a tax balance sheet for Parchment. Discuss the relevance of conduit theory and entity theory in the creation of Parchment.
c. Assume that Parchment sells the land for $150,000 four months after Parchment was created. Discuss the effect of the sale on the financial accounting balance sheet and the tax balance sheet.


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  • CreatedMay 25, 2015
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