X Co. adopts a plan of complete liquidation and makes the following pro rata distributions to its shareholders (assume all areindividuals):A- Cash: $70,000;B- Inventory: FMV-$20,000 Basis-$20,000 Mortgage-$10,000;C- Inventory: FMV-$30,000 Basis-$15,000 Mortgage-$40,000;D- Capital Asset: FMV-$500 Basis-$2,800; (Assume that X Co. acquired the property distributed to D in a Sec. 351 transfer 6months before adopting the plan of liquidation when the FMV of the property was $800 and X Co.'s basis was $2,800).E- Capital Asset: FMV-$10,000 Basis-$4,000.The Gain or Loss recognized by E is.

To find the gain or loss recognized by each of the shareholders (A, B, C, D, E) from the…

Answered: X Co. adopts a plan of complete…

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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(TCO A) Steven Inc. sold $219,000 in inventory to Thomas Co. during 20X0 for $300,000. Thomas resold $100,000 of this merchandise in 20X0 with the remainder to be disposed of during 20X1.Assume Steven owns 28% of Thomas and applies the equity method.Required:(1) Determine Steven's share of the unrealized gain at the end of 20X0.(2) Prepare the journal entry Steven should record at the end of 20X0 to defer the unrealized intra-entity inventory profit.
i
Sub Corporation is owned 80% by Parent Corporation and 20% by Superior Corp, a wholly owned subsidiary of Parent Corp. Sub Corp has three assets: Equipment FMV $80,000, AB $56,000; Inventory FMV $145,000, AB $110,000; Land FMV $175,000, AB $200,000. Sub adopts a formal plan of liquidation and immediately thereafter distributes its assets to Parent and Superior. Superior receives the Equipment and Parent receives the remainder of the assets. Parent's adjusted basis in its Sub Corporation stock was equal to $240,000 and Superior's adjusted basis in its Sub stock was equal to $60,000. Parent Corp and Superior had acquired their Sub Corporation stock six years prior to its liquidation. What are the tax consequences of this liquidation to Parent Corp, Superior Corp and Sub Corp? Sub Corporation is owned 50% by Parent Corporation and 50% by Ultra Corp, a wholly owned subsidiary of Parent Corp. Sub Corp has three assets: Equipment FMV $55,000, AB $36,000; Inventory FMV $145,000, AB $110,000;…
Kent Ltd owns all of the shares of Lodh Ltd. In relation to the following intragrouptransactions, all parts of which are independent unless specified, prepare theconsolidation worksheet adjusting entries for preparation of the consolidated financialstatements as at 30 June 2020. Assume an income tax rate of 30%. a. On 1 January 2020, Kent Ltd sold inventory costing $10,000 to Lodh Ltd at a transfer (sale) price $16,000. Lodh Ltd sold half of this inventory to an external party for $10,000 (i.e., half of the inventory is remained with Lodh Ltd at the end of the year). b. During March 2018, Lodh Ltd paid a $5,500 interim dividend. c. Kent Ltd rented a spare warehouse to Lodh Ltd. The total charge for the rental was $6,000. Lodh Ltd paid the whole amount to Kent Ltd during the year. d. On 1 July 2019, Kent…
Hh1.
B6.
During the liquidation, the sale of all the assets of liquidated corporation resulted to net proceeds of P500,000. Liquidation expense amounting to P30,000 has been paid at the start of liquidation from the net proceeds of disposal of all assets. Before the liquidation, the following data are provided concerning the financial position of the said financially distressed corporation:• The corporation has total assets with book value of P1,000,000 and deficiency amounting to(P170,000.)• An investment property with book value of P250,000 and realizable value of P150,000 secured a loanpayable amounting to P50,000.• Inventory with book value of P500,000 and realizable value of P50,000 secured a note payableamounting to P100.000• Salaries payable and come tax payable amounted to P50,000 and 20,000. respectively. What is the amount received by partially secured creditor?
In a qualifying reorganization, Cato Corporation exchanges $8,005,000 worth of stock and property valued at $3,202,000 ($1,601,000 basis) for all of Firestar Corporation's assets, which have a value of $11,207,000 and a $2,241,400 basis. Firestar distributes the property received from Cato. The exchange meets all Code requirements. If an amount is zero, enter "0". a. What is Cato's recognized gain/loss from the reorganization? Cato recognizes a gain of $ b. What is Firestar's recognized gain/loss from the reorganization? Firestar recognizes no gain or loss of $
Accounting A and B, unrelated individuals, were the sole shareholders of L corporation. A was a 60% shareholder and B was a 40% shareholder. Pursuant to a plan of liquidation, L liquidated and distributed its two assets to A and B pro rata. (Asset#1 a capital asset acquired 2 years ago in a Section 351 transaction with a fair market value ("FMV") of $100,000 and an adjusted basis of $110,000 and Asset #2 an ordinary asset acquired two years ago in a taxable purchase with a FMV of $60,000 and adjusted basis of $70,000). L also distributed a liability of $10,000 (pro rata). L had no other tax attributes or transactions. A's adjusted basis $100,000 and B's adjusted basis was $20,000 in their L shares respectively. i. What income, gain or loss, if any, does L recognize as a result of the Liquidation? ii. What income, gain of loss, if any, does B recognize as a result of the Liquidation? iii. What adjusted basis does A take in A's share of Asset #
On January 1, 2019, Post Corporation acquired 80 percent of Star Company's common stock for $160,000 cash, when the book value of Star Company was $160,000. At the date of the business combination, the book values of Star's net assets and liabilities approximated fair value except for inventory, which had a book value of $40,000 and fair value of $45,000, and equipment, which had a book value of $100,000 and a fair value of $120,000. Additional information: * Star Company uses the FIFO method and all inventory acquired on January 1, 2019 were sold during 2019. Equipment has a remaining useful life of 10 years, and the straight-line method is used. * Star reported net income of $60,000 and $75,000 for 2019 and 2020 respectively. * Star Company declared and paid dividends of $30,000 in 2019 and $40,000 in 2020. What is the balance of Noncontrolling interest in Net Assets on December 31, 2020? Select one: a. $52,200 b. $53,000 c. $51,200 d. $40,000
Sub Corporation is a wholly owned subsidiary of Parent Corporation. Sub Corp has three assets: Cash $20,000; Inventory FMV $200,000, AB $140,000; Land FMV $180,000, AB $210,000. Sub adopts a formal plan of liquidation and immediately thereafter distributes its assets to Parent. Parent's adjusted basis in its Sub Corporation stock was equal to $285,000. Parent had acquired Sub Corporation six years prior to the liquidation. What are the tax consequences of this liquidation to Parent Corp and Sub Corp? Sub Corporation is owned 95% by Parent Corporation and 5% by Brian an unrelated person. Sub Corp has three assets: Equipment FMV $20,000, AB $6,000; Inventory FMV $200,000, AB $140,000; Land FMV $180,000, AB $210,000. Sub adopts a formal plan of liquidation and immediately thereafter distributes its assets to Parent. Parent's adjusted basis in its Sub Corporation stock was equal to $285,000 and Brian's adjusted basis in his Sub stock was equal to $13,500. Parent Corp and Brian had acquired…
Required information Problem 18-67 (LO 18-5) (Algo) [The following information applies to the questions displayed below] Nail Corporation made a distribution of $589,110 to Rusty in partial liquidation of the company on December 31 of this year. Rusty, an individual, owns 100 percent of Nail Corporation. The distribution was in exchange for 50 percent of Rusty's stock in the company. At the time of the distribution, the shares had a fair market value of $219 per share. Rusty's tax basis in the shares was $50 per share. Nail had total E&P of $8,485,000 at the time of the distribution. Problem 18-67 Part a (Algo) a. What are the amount and character (capital gain or dividend) of any income or gain recognized by Rusty because of the partial liquidation? Answer is complete but not entirely correct. Capital gain $ 224 per share

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