Able Corporation decided to make a public offering of bonds to raise needed capital. It publicly sold $2,500,000 of 8% debentures in accordance with the registration requirements of the Securities Act of 1933. The financial statements filed with the registration statement contained the unqualified opinion of Baker & Baker, CPAs. The financial statements overstated Able’s net income and net worth. Through negligence, Baker & Baker did not detect the overstatements. As a result, the bonds, which originally sold for $1,000 per bond, have dropped in value to $700. Ira is an investor who purchased $10,000 of the bonds. He promptly brought an action against Baker & Baker under the Securities Act of 1933.
Answer the following, providing reasons for your conclusions:
a. Will Ira likely prevail on his claim under the Securities Act of 1933?
b. Identify the primary issues that will determine the likelihood of Ira’s prevailing on the claim.
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Auditing: A Risk Based-Approach (MindTap Course List)
- LED Corporation owns $1,000,000 of Branch Pharmaceuticals bonds and classifies its investment as securities held-to-maturity. The market price of Branch’s bonds fell by $450,000 due to concerns about one of the company’s principal drugs. The concerns were justified when the FDA banned the drug. LED views $200,000 of the $450,000 loss as related to credit losses, and the other $250,000 as noncredit losses. LED thinks it is more likely than not that it will have to sell the investment before fair value recovers. What journal entries should LED record to account for any credit or noncredit losses in the current period? How should the decline affect net income and comprehensive income? General Journal What journal entries should LED record to account for any credit or noncredit losses in the current period? Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field. No Transaction General Journal Debit…arrow_forwardMr. Pacman filed a collection action against “PDP” Corporation. Upon execution of the court’s decision, “PDP” Corporation was found to be without assets. Thereafter Mr.Pacman filed an action against its present and past stockholder “Laban” Corporation which owned substantially all of the stocks of “PDP” Corporation. The two corporations have the same board of directors and “Laban” Corporation financed the operations of “PDP” Corporation. May “Laban” Corporation be held liable for the debts of “PDP” Corporation? Why? pls help mearrow_forwardAs an auditor for the CPA firm of Bunge and Dodd, you encounter the following situations in auditing different clients. Desi Corporation is a closely held corporation whose stock is not publicly traded. On December 5, the corporation acquired land by issuing 5,000 shares of its $20 par value common stock. The owners’ asking price for the land was $120,000, and the fair market value of the land was $115,000. Lucille Corporation is a publicly held corporation whose common stock is traded on the securities markets. On June 1, it acquired land by issuing 20,000 shares of its $10 par value stock. At the time of the exchange, the land was advertised for sale at $250,000.The stock was selling at $12 per share. Instructions: Prepare the journal entries for each of the situations above.arrow_forward
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