Exercise 19-30 (Algorithmic) (LO. 8) During the current year, Gnatcatcher, Inc., (E & P of $1,300,000) distributed $575,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $143,750 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. If required, round your answers to nearest dollar. a. Assume that the distribution to Brandi is a qualifying stock redemption. The distribution is taxed as a sale or exchange Feedback ►Check My Work ✔and Brandi's tax liability is $ b. Assume that the distribution to Yuen is a nonqualified stock redemption. The distribution is taxed a dividend ✔and Yuen's tax liability is $

Exercise 19-30 (Algorithmic) (LO. 8) During the current year, Gnatcatcher, Inc., (E & P of $1,300,000) distributed $575,000 each to Brandi and Yuen in redemption of some of their Gnatcatcher stock. The two shareholders acquired their shares five years ago. Each shareholder is in the 32% tax bracket, and each had a $143,750 basis in the redeemed stock. Assume taxpayers in the 32% tax bracket are subject to the long-term capital gains and qualified dividends tax rate of 15%. If required, round your answers to nearest dollar. a. Assume that the distribution to Brandi is a qualifying stock redemption. The distribution is taxed as a sale or exchange Feedback ►Check My Work ✔and Brandi's tax liability is $ b. Assume that the distribution to Yuen is a nonqualified stock redemption. The distribution is taxed a dividend ✔and Yuen's tax liability is $

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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Accounting On March 19, 2022, Rick and Michelle form Road Runner Corporation as equal 50/50 shareholders with the following investment, for which each received 10,000 shares of Road Runner stock: Rick Cash From Michelle Equipment (basis $100,000; fair market value $50,000) $ 50,000 Land (basis $600,000; fair market value $850,000) From $900,000 $850,000 a. Tax consequences of this formation? b. Would your answer change if Rick contributed just $850,000 because Michelle's equipment was subject to a liability of $50,000, which Road Runner assumed? c. Would your answer change if Rick contributed $900,000 in return for 10,000 shares but Michelle instead received $9,000 in cash and 9,900 shares (worth $891,000) of stock of Road Runner in return for her contribution of land & equipment, and the equipment was not subject to a liability?
2. T corporation (e & p $800,000) has 1,000 shares of stock outstanding. The shares are owned as followed: james 600 shares; stephanie (james sister) 300 shares; luke (james son) 100 shares. T corporation owns land (basis of $300,000, fmv of $260,000) that it purchased as an investment 10 years ago. James had a basis of $275,000 in his shares. What are the tax consequences for both t cororation and james if the distribution is: a qualified stock redemption? b. liquidating distribution?
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5. On January 1, 202X, Dianne Corporation acquired the net assets of Cyril Corporation by issuing 60,000 shares with par and market values of P20 and P2,300,000, respectively. Moreover, it agreed to pay an additional Pi70,000 on January 1, 202Z if the average income in 202X and 202Y exceeds P150,000 per year. The expected value of the additional payment is estimated at P102,000 based on the 60% probability of achieving the target average income. The carrying and fair values of Cyril Corporation's identifiable net assets as of the acquisition date are P2,200,000 and P2,000,000, respectively. Required: a. Determine the amount of goodwill or gain on bargain purchase from the above transaction. b. Give the adjusting entry assuming that the company determined on September 30, 202X that there is an 80% probability that the estimated average income will be achieved. c. Give the adjusting entry assuming that the company determined on March 31, 202Y that there is a 90% probability that the…
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CFAS Company received a donation of 2,000 shares of its P5 par value ordinary shares from a shareholder. On that date, the share's fair value was P35 per share. The share was originallyissued for P25 per share. By what amount would this donation cause total sharcholders equity to change? (Usc negative sign to indicate a decrease)
9. Luke owns 100 shares of common stock in Neon Corporation purchased several years ago for $6,000. In the current year Luke received a nontaxable distribution of stock rights to purchase 40 additional shares of stock in Neon Corporation for $10 each. On the date of the distribution the FMV of the common stock was $90 per share and the FMV of the stock rights was $3.000, What is Luke's basis in the stock rights? a. $ 0 b. $3,000 C. $1,500 d. $4,500 e. None of the answers provided is correct
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#13 YOO-YOO Company purchased 200 of the 1000 outstanding shares of WEBUL Company's common stock for $710000 on January 2, 2021. In 2021, WEBUL Company declared dividends of $155000 and reported earnings for the year of $510000.If YOO-YOO Company used the fair value method of accounting for its investment in WEBUL Company, its Equity Investments (WEBUL) account on December 31, 2021, should be $812000. $710000. $679000. $781000.
subject:accounting
29 Malaki Corporation has an investment in 5,000 shares of Wallace Company ordinary shares with a cost of P218,000. These shares are used in a property dividend to shareholders of Malaki. The property dividend is declared on May 25 and scheduled to be distributed on July 31 to shareholders of record on June 15. The market value per Wallace share is P63 on May 25, P66 on June 15, and P68 on July 31. The net effect of this property dividend on retained earnings is a reduction of?
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