Financial Accounting Nova Corp. is indebted to Hanson under a $1,000,000, 10%, four-year notedated January 1, 2014. Due to Nova's financial difficulties in 2017, Nova owedaccrued interest of $120,000 on the note at December 31, 2017. Under atroubled debt restructuring, on December 31, 2017, Hanson agreed to settlethe note and accrued interest for a parcel of land with a fair value of $850,000.Nova's acquisition cost of the land is $700,000. Ignoring income taxes, on its2017 income statement Nova should report as a result of the troubled debtrestructuring:

Step 1: Definition of Troubled Debt Restructuring (Asset Transfer Method)When a company settles a…

Answered: Nova Corp. is indebted to Hanson under…

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter7: Corporations: Reorganizations

Section: Chapter Questions

Problem 42P

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On November 1, 2021, Sheridan Company purchased Pina, Inc., 10-year, 9%, bonds with a face value of $ 850000, for $ 770000. An additional $ 29000 was paid for the accrued interest. Interest is payable semiannually on January 1 and July 1. The bonds mature on July 1, 2028. Sheridan uses the straight-line method of amortization. Ignoring income taxes, the amount reported in Sheridan's 2021 income statement as a result of Sheridan's available-for-sale investment in Pina was $ 7975. $ 10525. $ 11250. $ 9250.
Ramirez Company has a held-for-collection investment in the 6%, 20-year bonds of Soto Company. The investment was originally purchased for $1,200,000 in 2019. Early in 2020, Ramirez recorded an impairment of $300,000 on the Soto investment, due to Soto's financial distress. In 2021, Soto returned to profitability and the Soto investment was no longer impaired. What entry does Ramirez make in 2021 under (a) GAAP and (b) IFRS?
On December 31, 2017, PanTech Company invests $20,000 in SoftPlus, a variable interest entity. In contractual agreements completed on that date, PanTech established itself as the primary beneficiary of SoftPlus. Previously, PanTech had no equity interest in SoftPlus. Immediately after PanTech’s investment, SoftPlus presents the following balance sheet:Each of the above amounts represents an assessed fair value at December 31, 2017, except for the marketing software. Accordingly the December 31 fair value of SoftPlus is assessed at $80,000.a. If the marketing software was undervalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2017, consolidated financial statements?b. If the marketing software was overvalued by $20,000, what amounts for SoftPlus would appear in PanTech’s December 31, 2017, consolidated financial statements?
ABC Co. owes SAR 433,000 to XYZ Inc. The debt is a 10-year, 11% note. Because ABC Co. is in financial trouble,XYZ Inc. agrees to accept some property and cancel the entire debt. The property has a book value of SAR 150,000 and a fair value of SAR 230,000. Prepare the journal entry on ABC 's books for debt settlement.
On January 1, 2024, Pikes Corporation loaned Venti Company $311,000 and agreed to guarantee all of Venti’s long-term debt in exchange for (1) decision-making authority over all of Venti’s activities and (2) an annual management fee of 25 percent of Venti’s annual revenues. As a result of the agreement, Pikes becomes the primary beneficiary of Venti (now a variable interest entity). Pikes’ loan to Venti stipulated a 10 percent (market) rate of interest to be paid annually with principal due in 10 years. On January 1, 2024, Pikes estimated that the fair value of Venti’s equity shares equaled $86,000 while Venti’s book value was $66,000. Any excess fair over book value at that date was attributed to Venti’s trademark with an indefinite life. Because Pikes owns no equity in Venti, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest. Venti paid Pikes 25 percent of its 2024 revenues at the end of the year and recorded the payment in other…
On January 1, 2021, Pikes Corporation loaned Venti Company $309,000 and agreed to guarantee all of Venti's long- term debt in exchange for (1) decision-making authority over all of Venti's activities and (2) an annual management fee of 25 percent of Venti's annual revenues. As a result of the agreement, Pikes becomes the primary beneficiary of Venti (now a variable interest entity). Pikes' loan to Venti stipulated a 10 percent (market) rate of interest to be paid annually with principal due in 10 years. On January 1, 2021, Pikes estimated that the fair value of Venti's equity shares equaled $84,000 while Venti's book value was $64,000. Any excess fair over book value at that date was attributed to Venti's trademark with an indefinite life. Because Pikes owns no equity in Venti, all of the acquisition-date excess fair over book value is allocated to the noncontrolling interest. Venti paid Pikes 25 percent of its 2021 revenues at the end of the year and recorded the payment in other…
Reimers Company acquires Rollins Corporation on January 1, 2017. As part of the agreement, the parent states that an additional $100,000 payment to the former owners of Rollins will be made in 2018, if Rollins achieves certain income thresholds during the first two years following the acquisition. How should Reimers account for this contingency in its 2017 consolidated financial statements?
Sym Corporation, a wholly owned subsidiary of Paratec Corporation, leased equipment from its parent company on August 1, 2016. The terms of the agreement clearly do not require the lease to be accounted for as a capitallease. Both entities are accounting for the lease as an operating lease. The lease payment is $12,000 per year, paid in advance each August 1.Paratec purchased its investment in Sym on December 31, 2011, when Sym had a retained earnings balance of $150,000. Paratec is accounting for its investment in Sym under the cost method. Included in the original purchase price was a $50,000 premium attributable to Sym’s history of exceptional earnings.The December 31, 2018, trial balances of Paratec and its subsidiary are presented below. Paratec Corporation Sym CorporationCash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,000 40,000Accounts Receivable (net) . . . . . . . . . . . . .…
XYZ Co. at the end of 2018, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income € 750,000 Estimated expenses deductible for taxes when paid 1,200,000 Extra depreciation (1,350,000) Taxable income € 600,000 Estimated warranty expense of €800,000 will be deductible in 2019, €300,000 in 2020, and €100,000 in 2021. The use of the depreciable assets will result in taxable amounts of €450,000 in each of the next three years. Instructions (a) Prepare a table of future taxable and deductible amounts. (b) Prepare the journal entry to record income tax expense, deferred income taxes, and income taxes payable for 2018, assuming an income tax rate of 40% for all years.
On March 25, 2021, Phillips Corporation purchased bonds of Atlas Corporation for $160 million and classified the securities as trading securities. On December 31, 2021, these bonds were valued at $176 million. Three months later, on April 3, 2022, Phillips Corporation sold these bonds for $167 million. As part of the multistep approach to record the 2022 transaction, Phillips Corporation should first update the fair value adjustment by recording: An unrealized holding gain of $25 million in 2022. An unrealized holding loss of $9 million in 2022. An unrealized holding gain of $7 million in 2022. A gain of $7 million in 2022.
Pharoah Co. at the end of 2017, its first year of operations, prepared a reconciliation between pretax financial income and taxable income as follows: Pretax financial income Estimated litigation expense Extra depreciation for taxes Taxable income $ 35,50,000 40,55,000 (60,00,000) $ 16,05,000 The estimated litigation expense of $4055000 will be deductible in 2018 when it is expected to be paid. Use of the depreciable assets will result in taxable amounts of $2000000 in each of the next 3 years. The income tax rate is 40% for all years. Income taxes payable is
Purple Corp. reported under GAAP for the year ended 12/31/2024 depreciation expense $45,000 and warranty expense $25,000. During 2024, $5,000 in warranties were serviced, and the remainder is estimated to be serviced over the following 4 years. Under the tax code, depreciation for 2024 would be $60,000. Assuming these are the only differences between GAAP and the tax code, how much would be reported as a deferred tax expense or deferred tax benefit on the income statement for the year ended 12/31/2024 if the future tax rate will be 30%? A A deferred tax expense of $4,500 B A deferred tax benefit of $6,000 C A deferred tax expense of $1,500 D A deferred tax benefit of $1,500

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