7. A corp seeks to acquire T corp. A transfers 500,000 shares of voting stock and 100,000 shares of non-voting stock to the shareholders of T corp in exchange for all their capital stock. T corp is thereafter a subsidiary of A corp. This transaction qualifies as a: a. "A" reorganization b. "B" (stock for stock) reorganization c. "C" reorganization d. Taxable transaction e. None of the above
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- 2a. Alpha Corporation owns assets valued at $400,000 and liabilities of $100,000. Beta Corporation transfers $160,000 of its voting stock and $40,000 in cash for 75% of Alpha's assets and all of its liabilities. Alpha distributes its remaining assets and the Beta stock to its shareholders. Alpha then liquidates. Is this a taxable transaction? If this is not a taxable transaction, then identify the type of reorganization. b. Beta Corporation owns assets valued at $1,500,000 with liabilities of $700,000, and Alpha holds assets valued at $350,000 with liabilities of $150,000. Beta transfers 200,000 shares of stock and $50,000 cash, and it accepts $100,000 of Alpha's liabilities, in exchange for all of the Alpha assets. Alpha distributes the Beta stock to its shareholders for their Alpha stock and then ceases to exist. Is this a taxable transaction? If this is not a taxable transaction, then identify the type of reorganization. c. Alpha Corporation obtained 200,000 shares of Beta…S1: A stock acquisition occurs when one corporation pays cash, issue stock, orissues debt for all or part of the voting stock and of another company; and the acquired company dissolves and ceases to exist as a separate legal entity. S2: In an asset acquisition, the books of the acquired company are closed out and its assets and liabilities are transferred to the books of the acquirer. A. Both statements are correct.B. Only S2 is correct.C. Only S1 is correct.D. Both statements are incorrect.Pursuant to a complete liquidation, Carrot Corporation distributes to its shareholders real estate held as an investment (basis of $1,066,000, fair market value of $1,385,800). a. Determine the gain or loss recognized by Carrot on the distribution if no liability is involved. If no liability is involved, Carrot has a recognized of $ on the distribution. b. Determine the gain or loss recognized by Carrot on the distribution if the real estate is subject to a liability of $1,172,600. If the real estate is subject to a liability of $1,172,600, Carrot has a recognized of $ C. Determine the gain or loss recognized by Carrot on the distribution if the real estate is subject to a liability of $1,492,400. If the liability were $1,492,400, Carrot's recognized on the distribution would be
- An entity acquired a 30% interest in another entity in Year I. In Year 2, it acquired another 50% equity interest in the same entity. Which of the following statements is valid?I. The entity's per-existing 30% equity interest should be remeasured at fair value at the acquisition date.Il. The entity's net assets should be remeasured at fair value at acquisition date. a. II only b. Neither I nor II c. Both I and II d. I only"IFRS 10 Consolidated Financial Statements states that there are few ways to ascertain if the investor 'controls' and 'influences' its investees." Evaluate the statement above with reference to any applicable accounting standard and demonstrate the application of IFRS 10 Consolidated financial statements with the scenario provided below. Further, you must prepare a simplified consolidated statement of financial position as at 31st December 2020 а. to support your demonstration. Scenario: P acquires 100% of S's ordinary shares for RM1,500,000 on 31st December 2018. S's reserves (consists of only retained earnings) were RM 400,000 at the date of acquisition. The following presents the statement of financial position of both companies as at 31st December 2020. P S Notes RM RM As at 31st Dec 2020 000. *000 Non-current assets: Property, Plant and equipment Goodwill 2,000 1,000 Investment in S 1,500 Net current asset 300 200 3,800 1,200 Share capital 300 800 Retained earnings 3,500 400 3,800…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)
- Transitory Company acquired the following equity securities: December 31, 2022 Moon Company Star Company Sun Company December 31, 2023 Moon Company Star Company Sun Company Statement of Financial Position Investments - FVOCI Statement of Equity Other Comprehensive Income Retained earnings Statement of Other Comprehensive Income Unrealized gain / (loss) [a] [d] [g] Cost The equity securities do not qualify as held for trading. The entity has elected irrevocably to present changes in fair value in other comprehensive income. Requirement: Complete the table below. Write zero (0) if it is not applicable. Acquisition Date [] 200,000 400,000 600,000 200,000 400,000 600,000 Market 120,000 280,000 650,000 220,000 300,000 580,000 December 31, 2022 [b] [e] [h] [k] December 31, 2023 [c] [U] D [1]Which of the following statements is correct with respect to the § 338 election? a. The parent recognizes no gain (loss) as a result of the election. b. The subsidiary corporation makes the § 338 election. c. A qualified stock purchase occurs when a corporation acquires in a taxable transaction at least 80% of the stock (voting power and value) of another corporation within an 18-month period. d. Gain but not loss is recognized by the subsidiary as a result of a deemed sale of its assets.2. ABC Corporation holds ordinary shares of XYZ Inc. acquired as follows: Date of Acquisition Shares Total Cost September 19, Year 2 750 60,000 July 16, Year 1 1,250 110,000 The shares above were classified as equity investments at fair value through other comprehensive income. Fair values on December 31, Year 1 and Year 2 were P 85 and P 90 respectively. In Year 3, ABC Corp. Received 2,000 rights to purchase XYZ Inc. ordinary shares at P 80 per share. Five rights are required to purchase one share. ABC Corp. used rights to purchase additional 300 shares of XYZ Inc when each shares sells at P 100. Subsequently ABC sold the remaining rights at 4.50 each. At December 31, Year 3. XYZ Inc ordinary shares sell at P 98. Required:a) Determine the amount of the equity account Unrealized Gains or Losses on Equity Investments at Fair Value through Other Comprehensive Income at the end of the Years 1 and 2.b) Determine the amount taken to other comprehensive income as a result of the…
- An entity acquired a 30% interest in another entity in Year I. In Year 2, it acquired another 50% equity interest in the same entity. Which of the following statements is valid?I. The entity's per-existing 30% equity interest should be remeasured at fair value at the acquisition date.Il. The entity's net assets should be remeasured at fair value at acquisition date. Neither I nor II I only II only Both I and IIPursuant to a complete liquidation, Carl Corporation distributes to its shareholders real estate held as an investment (basis of $650,000, fair market value of $775,000). a. Compute the gain or loss recognized by Carl Corporation on the distribution if no liability is involved. b. Compute the gain or loss recognized by Carl Corporation on the distribution if the real estate is subject to a liability of $700,000. c. Compute the gain or loss recognized by Carl Corporation on the distribution if the real estate is subject to a liability of $895,000.Exercise 20-18 (Algorithmic) (LO. 1) On January 7, 2022, Martin Corporation acquires two properties from a shareholder solely in exchange for stock in a transaction that qualifies under § 351. The shareholder's basis, the fair market value, and the built-in gain (loss) of each property are: Property 1 Property 2 Net built-in loss Shareholder's Fair Market Built in Gain Basis Value or (Loss) $439,440 $476,060 $366,200 $622,540 $73,240 ($146,480) ($73,240) Martin adopts a plan of liquidation later in the year and distributes Property 2 to a 20% shareholder when the property is worth $402,820. a. Compute Martin's basis in Property 1 and in Property 2 as of January 7, 2022. 125,000 x. Martin's basis is Property 1 is a carryover Martin's basis in Property 2 is a stepped-down ✔ basis of $ ✔basis of $ 3,233,223 X. b. Compute Martin's realized and recognized loss on the liquidating distribution of Property 2. 2,324,232 X. 23,324 X and a recognized loss of $ Martin has a realized loss of $