Response to the following problem:
Hewlard Pocket's market value balance sheets illustrate the effects of dividends versus repurchases. Assets Liabilities and Shareholders' Equity
A. Original balance sheet Cash $ 150,000
Debt $ 0
Other assets 950,000
Equity 1,100,000
Value of firm $ 1,100,000
Value of firm $ 1,100,000
Shares outstanding = 100,000
Price per share = $1,100,000 / 100,000 = $11 Pocket wins a lawsuit and is paid $110,000 in cash.
The market value of the equity rises by that amount, and Pocket decides to pay out $2.10 per share.
a. What will be Pocket's stock price if the payout comes as a cash dividend? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
b. What will be Pocket's stock price if the payout comes as a share repurchase? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
26Q Dave is a 50% partner with Luis in the NP partnership. The partners share income and loss equally. He contributes land to the partnership worth $1,200 in which he has an adjusted basis of $400. The land is a capital asset to him and to the partnership. Two years later the partnership sells the land for $1,600.
A: How much gain or loss does the partnership recognize on the sale?
B: How much is allocated to each partner?
C: Does the answer to part (b) change (and if so how) if the partnership sells the land for $700? Explain.