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a. What amount of gain or loss does BLI recognizelf the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction? Gain or loss recognized Corporate-level tax

a. What amount of gain or loss does BLI recognizelf the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction? Gain or loss recognized Corporate-level tax

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows: Note: Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign. Cash Receivables Building Land Total Payables Mortgage* Total Adjusted Tax Basis $ 19,000 24,000 35,500 50,000 FMV $ 19,000 24,000 71,000 155,000 $ 269,000 $ 128,500 $ 27,000 89,000 $ 116,000 Gain or loss recognized Corporate-level tax $ 27,000 89,000 $ 116,000 Appreciation 35,500 105,000 $ 140,500 The mortgage is attached to the building and land. Ernesto was asking for $297,000 for the company. His tax basis in the BLI stock was $80,000. Included in the sales price was an unrecognized customer list valued at $80,000. The unallocated portion of the purchase price ($64,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $297,000. Problem 19-58 Part a (Algo) a. What amount of gain or loss does BLI recognizelf the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?
Transcribed Image Text:Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Incorporated (BLI). As part of their discussions with the sole shareholder of the corporation, Ernesto Young, they examined the company's tax accounting balance sheet. The relevant information is summarized as follows: Note: Leave no answer blank. Enter zero if applicable. Negative amounts should be indicated by a minus sign. Cash Receivables Building Land Total Payables Mortgage* Total Adjusted Tax Basis $ 19,000 24,000 35,500 50,000 FMV $ 19,000 24,000 71,000 155,000 $ 269,000 $ 128,500 $ 27,000 89,000 $ 116,000 Gain or loss recognized Corporate-level tax $ 27,000 89,000 $ 116,000 Appreciation 35,500 105,000 $ 140,500 The mortgage is attached to the building and land. Ernesto was asking for $297,000 for the company. His tax basis in the BLI stock was $80,000. Included in the sales price was an unrecognized customer list valued at $80,000. The unallocated portion of the purchase price ($64,000) will be recorded as goodwill. Assume Ernesto agrees to sell his stock in BLI to Amy and Brian for $297,000. Problem 19-58 Part a (Algo) a. What amount of gain or loss does BLI recognizelf the transaction is structured as a stock sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?
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