Townsend Corporation Declared a 1-For-1 Stock Split to All Common

question 20

Essay

Townsend Corporation declared a 1-for-1 stock split to all common stock shareholders of record on December 31, 20X3. Townsend reported current E&P of $590,000 and accumulated E&P of $1,190,000. The total fair market value of the stock distributed was $690,000. Regina Williams owned 1,800 shares of Townsend common stock, with a tax basis of $390 per share ($702,000 total). The fair market value of the common stock was $490 per share on December 31, 20X3. What is Regina's income tax basis per share in the new and existing common stock she owns in Townsend, assuming the distribution is tax-free?

Recognize the need for and challenges of international accounting standards.

Familiarize with basic concepts and definitions in accounting including assets, liabilities, and owner's equity.

Identify ethical considerations in financial accounting on an international scale.

Grasp the types of business organizations and their commonality across different countries.

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Definitions:

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument.

Maturity

The final payment date of a loan or other financial instrument, at which point the principal (and all remaining interest) is due to be paid.

Annual Coupon

The total interest to be paid on a bond each year, divided between regular payment periods.

Bonds

Bonds are fixed-income securities that represent a loan made by an investor to a borrower, typically corporate or governmental, where the borrower agrees to pay back the principal plus interest at a specified date.