Sean, a Sole Proprietor, Is Engaged in a Service Business

question 87

Essay

Sean, a sole proprietor, is engaged in a service business and uses the cash basis of accounting.In the current year, Sean incorporates his business by forming Aqua Corporation.In exchange for all of its stock, Aqua receives: assets (basis of $400,000 and fair market value of $2 million), trade accounts payable of $110,000, and loan due to a bank of $390,000.The proceeds from the bank loan were used by Sean to provide operating funds for the business.Aqua Corporation assumes all of the liabilities transferred to it.

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Definitions:

HBr

Hydrogen bromide; a diatomic molecule consisting of hydrogen and bromine, known for its use as a reagent in organic synthesis.

Allyl Cation

A positively charged ion (cation) with the formula C3H5+, characterized by a carbon atom connected to two other carbons via double bonds in a linear arrangement.

Carbon p Orbitals

Atomic orbitals composed of p electrons in carbon atoms, crucial for the formation of covalent chemical bonds through overlap.

Resonance Structures

Different forms of a molecule that have the same arrangement of atoms but differ in the placement of electrons, illustrating the delocalization of electrons within the molecule.