Packard Corporation transferred its 100 percent interest to State Company as part of a complete liquidation of the company. In the exchange, Packardreceived land with a fair market value of $445,000. Packard's basis in the State stock was $677,500. The land had a basis to State Company of$625,000. What amount of loss does State recognize in the exchange and what is Packard's basis in the land it receives?Multiple Choice$180,000 loss recognized by State and a basis in the land of $445,000 to Packard.$180,000 loss recognized by State and a basis in the land of $625,000 to Packard.No loss recognized by State and a basis in the land of $445,000 to Packard.No loss recognized by State and a basis in the land of $625,000 to Packard.

Answered: Packard Corporation transferred its 100…

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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On January 1, 20X1, Pepper purchased 70% interest in Salt for $420K. At the time of the purchase, Salt’s assets and liabilities were equal to book value except for Inventory, Building and Land (which had fair values in excess of book value of $10K, $30K and $45K respectively). Net Asset BV at the time of purchase was $440K. Included in the $420K purchase price was a covenant not to compete. The covenant was value at $30K and is for a two year period. At the time of the purchase, it was determined that the all of Salt’s depreciable assets had a remaining 5 year life and inventory had a 2 month life. The following events occurred during the year: Event #1 Salt sold inventory with an originally cost of $369K to Pepper for $450K. Pepper sold 70% to a third party for $600K and had 30% of the inventory remaining at the end of the year Event #2 On January 1, 20X1 Salt borrowed $750K from Pepper at 8% interest. Salt paid zero down on the principle during the year. However, Salt paid…
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On January 1, 2021, Casey Corporation exchanged $3,300,000 cash for 100 percent of the outstanding voting stock of Kennedy Corporation. Casey plans to maintain Kennedy as a wholly owned subsidiary with separate legal status and accounting information systems. At the acquisition date, Casey prepared the following fair-value allocation schedule: Fair value of Kennedy (consideration transferred) $ 3,300,000 Carrying amount acquired 2,600,000 Excess fair value $ 700,000 to buildings (undervalued) $ 382,000 to licensing agreements (overvalued) (108,000 ) 274,000 to goodwill (indefinite life) $ 426,000 Immediately after closing the transaction, Casey and Kennedy prepared the following postacquisition balance sheets from their separate financial records (credit balances in parentheses). Accounts Casey Kennedy Cash $ 457,000 $ 172,500 Accounts receivable 1,655,000…

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