Rob and Yi Form Bluebird Corporation with the Following Investments

question 113

Multiple Choice

Rob and Yi form Bluebird Corporation with the following investments. Each receives 50% of Bluebird's stock.In addition, Yi receives cash of $40,000.One result of these transfers is that Yi has a:

• A)Recognized loss of $60,000.
• B)Recognized loss of $20,000.
• C)Basis of $460,000 in the Bluebird stock assuming Bluebird reduces its basis in the land to $440,000).
• D)Basis of $400,000 in the Bluebird stock assuming Bluebird reduces its basis in the land to $440,000).
• E)None of the above.

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Definitions:

First-in

A method used in inventory valuation where the first goods purchased are the first ones to be used or sold.

Materials

Raw inputs used in the manufacturing of products or goods, part of the direct costs in production.

Direct Method

A cash flow statement reporting approach that lists major categories of gross cash receipts and payments.

Service Department

A segment of an organization that provides support services to other departments, rather than directly contributing to the production of goods.