Kevin Buys One Share of Mink,Inc $\text { Common } \quad \text { Freferred }$

question 105

Short Answer

Kevin buys one share of Mink,Inc.,common stock for $100.On February 3 of the current year,the corporation makes a nontaxable distribution of one share of preferred stock to all holders of record of common stock.On the distribution date,the common stock is trading at $250 and the preferred stock is trading at $50.After the distribution,Kevin's bases in the two shares of stock are:
$\text { Common } \quad \text { Freferred }$
a. $\$ 50.00 \quad \$ 50.00$
b. $\$ 100.00 \quad \$ - 0 -$
c. $\$ 83.33 \quad \$ 16.67$
d. $\$ 250.00 \quad \$ 50.00$
e. $\$ 80.00 \quad \$ 20.00$

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Definitions:

Cost Price Approach

A pricing method that determines the selling price of a product by adding a profit margin to the total cost of production.

Transfer Pricing

The pricing of goods, services, and intangibles transferred within divisions of a company or across affiliated entities to reflect market conditions.

Support Department

An organizational unit that provides essential services to other departments within an organization but does not directly contribute to profit.

Internal Support

Refers to the services and resources within an organization that assist its operations, such as IT support, human resources, and administrative assistance.