Explore BrainMass

Explore BrainMass

    Book and Tax accounting difference

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Need help answering questions (a) and (b).

    Jessup Corporation, which is publicly held, purchased 13,000 shares of ABC stock as a short-term investment for $85,000. At year-end, FMV of the ABC stock was $93,000. For financial reporting purposes, Jessup uses the mark-to-market method to account for its ABC investment. Consequently, it wrote up the book value of the stock to $93,000 and recorded $8,000 book income.
    (a) Does Jessup have a difference in its book and tax income with respect to the ABC stock?
    (b) Next year, Jessup sells the 13,000 ABC shares for $105,250 cash. Does this transaction result in a book/tax difference?

    © BrainMass Inc. brainmass.com June 3, 2020, 5:15 pm ad1c9bdddf
    https://brainmass.com/business/accounting/book-and-tax-accounting-difference-19926

    Solution Preview

    (a) Does Jessup have a difference in its book and tax income with respect to the ABC stock?
    <br>There is a difference in its book and tax income with respect to the ABC stock:
    <br>There is an $8,000 book ...

    $2.19

    ADVERTISEMENT