Wade and Paul Form Swan Corporation with the Following Investments

question 1

Multiple Choice

Wade and Paul form Swan Corporation with the following investments. Wade transfers machinery (basis of $40,000 and fair market value of $100,000) , while Paul transfers land (basis of $20,000 and fair market value of $90,000) and services rendered (worth $10,000) in organizing the corporation. Each is issued 25 shares in Swan Corporation. With respect to the transfers:

• A) Wade has no recognized gain? Paul recognizes income/gain of $80,000.
• B) Neither Wade nor Paul has recognized gain or income on the transfers.
• C) Swan Corporation has a basis of $30,000 in the land transferred by Paul.
• D) Paul has a basis of $30,000 in the 25 shares he acquires in Swan Corporation.
• E) None of the above.

---

Definitions:

Total Assets

The sum of all current and non-current assets that a company owns, as shown on the balance sheet.

Accrued Fees

Charges that have been incurred but not yet recorded or paid.

Adjusted Trial Balance

A roster displaying all accounts alongside their adjusted balances, utilized in the preparation of financial statements.

Error

A mistake in the recording, classification, or processing of financial information.