AccountingAbco Corporation declared a $5 per share dividend on September 15. The dateof record for the dividend was October 1 (the stock began selling ex-dividendon October 2). The dividend was paid on October 15. Jonas is a cash-methodtaxpayer. Determine if he must include the dividends in gross income under thefollowing circumstances:Jonas bought 100 shares of Abco stock on September 10 for $40 per share. Hereceived a $500 dividend on October 15. Jonas still owns the shares at year-end.Jonas bought 100 shares of Abco stock on August 22 for $40 per share. Jonassold his Abco shares on October 5 for $50 per share. Jonas received the $500dividend on October 15 (note that even though he didn't own the stock onOctober 15, he still received the dividend because he was the shareholder on therecord date).Jonas bought 100 shares of Abco stock for $64 per share on August 10. Hereceived the $100 dividend on October 15. Jonas still owns the shares at year-end.

A dividend represents a payment paid to shareholders by a firm. It is a part of the firm's profits…

Answered: Accounting Abco Corporation declared a…

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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Joel is a shareholder in an S corporation. He purchased 200 shares of the corporation at the beginning of the year for $25,000. His Schedule K-1 (Form 1120-S) for the same year reported ordinary business income of $1,300 in Part Ill, box 1 and $1,500 of net long-term capital gain in Part III, box 8a. What is Joel's year-end adjusted basis in the corporation? $25,000 $26,300 $26,500 $27,800 h
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) (4,600) 12,540 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income $ 8,440 What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) a. Johnstone distributed $7,200 to Marcus in year 2. Accumulated adjustments account Dividend income
Carla, Inc. purchased 1,810 shares of Oneida Corporation common stock for $84,600. During the year. Oneida paid a cash dividend of $1.10 per share. At year-end, Oneida stock was selling for $43.90 per share. Prepare Carla's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.) (a) (b) (c) Account Titles and Explanation Debit Credit
H. Tillman performed legal services for J. Laney. Due to a cash shortage, an agreement was reached whereby J. Laney. would pay H. Tillman a legal fee of approximately $11900 by issuing 2900 shares of its common stock (par $1). The stock trades on a daily basis and the market price of the stock on the day the debt was settled is $4.60 per share. Given this information, the journal entry for J. Laney. to record this transaction is:
Brent, Matt, Chris, Brad, and Anwer are five unrelated shareholders, and they each owns 20 of the 100 outstanding shares of Aggie Corporation. On June 30 of this year, Aggie distributed $100,000 in cash to the shareholders. On September 30 of this year, Aggie redeemed all Anwer's shares for $80,000. Aggie had $45,000 of accumulated E&P at the beginning of the year and reported $120,000 of current E&P at year-end. What is Aggie's accumulated E&P at the beginning of next year? Consult Revenue Rule 74-338. (Hint: determine the tax status of the redemption and then calculate the effect of the June distribution on current E&P.) Note: Negative amount should be indicated with a minus sign. > Answer is not complete. Current E&P $ 120,000 Less dividends paid (100,000) Undistributed Current E&P $ 20,000 Prorated Undistributed Current E&P at 9/30 S 15,000 Add Accumulated E&P at the beginning of year 45,000 Total Accumulated E&P at 9/30 $ 60,000 Reduce Accumulated E&P by Add current E&P in 4th…
III. Problems 1 RFBT Exercise Explain or state briefly the rule or reason for your answers. 1. A contract was entered into in the name of the corporation with the unanimous approval of all the stockholders. Is the contract binding on the corpora- tion? 2. X, a director in a corporation, is recorded in the book of the corporation as owner of one (1) share of stock. X admits that the true owner is Y, its President. Is X disqualified to be a director? 3. A vacancy occurs in the board of directors, fur- ther reducing the number from 11 to 6 members. Who is empowered to free the vacancy, the stockholders or the incumbent directors? 4. X was elected director in a corporation. The other directors who supported his election, assured hir a monthly compensation of P50,000. In fact, they approved a resolution granting him the compensation. Is X entitled to the compensation?
On January 2, Chaz transfers cash of $165,800 to a newly formed corporation for 100% of the stock. In its initial year, the corporation has net income of $41,450. The income is credited to the earnings and profits account of the corporation. The corporation distributes $12,435 to Chaz. If an amount is zero, enter "0". a. How do Chaz and the corporation treat the $12,435 distribution? Chaz has a of $ and the corporation has a deduction of $ b. Assume, instead, that Chaz transfers to the corporation cash of $82,900 for stock and cash of $82,900 for a note of the same amount. The note is payable in equal annual installments of $8,290 and bears interest at the rate of 6%. No distributions are made during the year to Chaz. However, at the end of the year, the corporation pays an amount to meet the loan obligation (i.e., the annual $8,290 principal payment plus the interest due). Determine the total amount of the payment and its tax treatment to Chaz and the corporation. The corporate…
Four unrelated shareholders own Benton Corporation's 400 shares of outstanding stock. As indicated below, Benton redeems a total of 100 shares for $500 per share from three of its shareholders. Each shareholder has a $230 per share basis in his or her stock. Benton's current and accumulated earnings and profits (E&P) at the end of the tax year is $150,000. View the shareholder data. Read the requirements. to Ethel, Fran, and Georgia? Ethel Fran Georgia Amount of income, gain, or loss Ethel Fran Georgia Character of income, gain, or loss Amount of income, gain, or loss 50,000 0 50,000 capital gain capital gain capital gain Requirement b. How would your answer to Part a change if Ethel were Georgia's mother? Character of income, gain, or loss dividend income return of capital Basis of remaining shares dividend income Basis of remaining shares Shareholder Data Shareholder Ethel Fran Georgia Henry Total Shares Held Before the Redemption Print 200 100 50 50 400 Done Shares Redeemed 40 30 30…
At the beginning of the current Year ("Year 1"), C Corporation ("C") had two shareholders, A and B, and accumulated E&P of $10,000. A's adjusted basis in his shares of C stock was $200 and B's adjusted basis in her shares of C stock was $3,000. During the current Year C had a capital gain of $4,000 on July 1, Year 1, but had no other income or deductions. C distributed $4,000 cash to each of its two shareholder's, A and B, on March 1, Year 1. On October 1 of Year 1, B sold her shares in C to D for $8,000. On December 5, Year 1, C distributed $4,000 cash to each of A and D. Question. a. What dividend income does A recognize, if any, during Year 1? (Write just the numerical value i.e. $50) b. Does A recognize any income other than dividend income? (If no write $0. If yes write how but just the number (i.e. $50)) c. What is X' accumulated E&P at the beginning of Year 2? (Write just the numerical value i.e. $50)
Assume the following year 2 income statement for Johnstone Corporation, which was a C corporation in year 1 and elected to be taxed as an S corporation beginning in year 2. Johnstone's earnings and profits at the end of year 1 were $11,560. Marcus is Johnstone's sole shareholder, and he has a stock basis of $46,000 at the end of year 1. Johnstone Corporation Income Statement December 31, Year 2 Year 2 (S Corporation) $ 174,000 ( 41,000) ( 66,000) ( 56,500) (10,000) ( 4,600) 12,540 $ 8,440 Sales r evenue Cost of goods sold Salary to owners Employee wages Depreciation expense Miscellaneous expenses Interest income Overall net income What is Johnstone's accumulated adjustments account at the end of year 2, and what amount of dividend income does Marcus recognize on the year 2 distribution in each of the following alternative scenarios? (Leave no answer blank. Enter zero if applicable.) b. Johnstone distributed $11,200 to Marcus in year 2. Accumulated adjustments account $ Dividend income
Moriny, na calendar years corporation in Denton, Texas, has two unrelated shareholders, each owning 50% of the stock. Both akarationers and a $400,000 stock basis as of January 1. At the beginning of the tax year, Money reports balances in AAA of $300,000 - and XP of $500,000 Dering the year, Money generates operating income of $100,000. At the end of the year, Money distributes securities worth $199.900, with an adjusted basis of $800,000. the two shareholders consent to an AAA bypass election. What is the Federall income tax effects of these transactions for the shareholders? If an amount is zero, enter "0". taxable distribution and a $ at the end of the year, and each shareholder's basis is $ tax-free distribution from AAA. The AAA is . AEP is reduced to $
Tamarisk Corporation purchased 380 shares of Sherman Inc. common stock for $13,300 (Tamarisk does not have significant influence). During the year, Sherman paid a cash dividend of $3.25 per share. At year-end, Sherman stock was selling for $37.00 per share.Prepare Tamarisk's journal entries to record (a) the purchase of the investment, (b) the dividends received, and (c) the fair value adjustment. (Assume a zero balance in the Fair Value Adjustment account.) (

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