Universal is a holding company Universal owns 10% of the shares of GBR Corp, 30% of the shares of NDE Corp, and 80% of the shares of BRT Corp. Manu is the controlling shareholder ofUniversal company, and owns 90% of the shares of Universal. With respect to the associations of these corporations, which of the following is correct?Choose the correct answerOA. Manu indirectly owns 9% of GBR Corp, 27% of NBE Corp, and 100% of BRT CorpOB. Manu indirectly owns 0% of GBR Corp, 0% of NBE Corp, and 100% of BRT CorpOC. Manu is associated with BRT Corp, as per ITA 256(1)(b)OD, Universal and BRT Corp. are associated as per ITA 256(1)(a)

The provisions of ITA 256 (1) deals with the associate relationship between two corporations. It…

Answered: Universal is a holding company…

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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T holds two business assets, X (with a basis of 30 and a value of 120) and Y (with a basis of 70 and value of 50). T also has outstanding debt of $40 (held by C). T is wholly owned by A whose basis for his T stock is 50 (with a value of $130). Acquiring corporation P will acquire T’s assets in what is assumed to be a qualified section 368 reorganization. If T merges into P for $65 of P stock and $65 in cash, which cash and stock are distributed to A upon the surrender of A’s T shares; and P assumes T’s debt to C. Describe the consequences of the reorganization transaction to T, T’s shareholder A & P. a) Transferor corporation (T) b) Transferor Corporation’s shareholder (A) c) Acquiring Corporation (P)
s
Gardner Corp. owns 80% of the voting common stock of Lockhart Co. Lockhart owns 70% of Canning Co. Gardner and Lockhart both use the initial value method to account for their investments. The following information is available from the financial statements and records of the three companies: Separate company net income before investment income Dividend income from investment in subsidiary Deferral of intra-entity gains Amortization expense related to excess fair value over book value of investment Gardner Lockhart Corp. Co. $900,000 $650,000 $150,000 250,000 120,000 110,000 80,000 What amount should be reported for consolidated net income? 40,000 Canning Co. 20,000 25,000 Separate company net income includes intra-entity gains before the consolidating deferral but does not include dividend income from investment in subsidiary.
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In early 2019, X acquired share ownership of 2 entities, namely Y and Z with the following information: • X acquired 30% of shares in Y, of which X previously owned 40% of Y's shares. Based on the analysis conducted by X, the additional 30% ownership of the shares resulted in X having control over Y. • X acquired 20% of Z's shares, of which X previously owned 60% of Z's shares. Based on the analysis carried out by X, X has control over Z. retains control over Z. Towards the end of 2020, X sold part of its ownership in both companies, with the following information: • X sells 15% of its ownership in Y shares. Based on the analysis conducted by X, the sale does not cause X to lose control over Y. • X sells 40% of its ownership in Z shares. Based on the analysis conducted by X, the sale causes X to lose control over Z. Explain how the accounting treatment for X for ownership of Y and Z when: 1. Acquisition of additional shares in early 2019. 2. Sale of partial ownership towards…
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None
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