On January 2, 2005, the board of directors of Photo Corporation assigned to a voting trust 15,000 shares of the 60,000 shares of Soto Company common stock owned by Photo. The trustee of the voting trust presently has custody of 40,000 of Soto’s 105,000 shares of issued common stock, of which 5,000 shares are in Soto’s treasury. The term of the voting trust is three years. Instructions Are consolidated financial statements appropriate for Photo Corporation and Soto Company for the three years ending December 31, 2007? Explain.

On January 2, 2005, the board of directors of Photo Corporation assigned to a voting trust 15,000 shares of the 60,000 shares of Soto Company common stock owned by Photo. The trustee of the voting trust presently has custody of 40,000 of Soto’s 105,000 shares of issued common stock, of which 5,000 shares are in Soto’s treasury. The term of the voting trust is three years. Instructions Are consolidated financial statements appropriate for Photo Corporation and Soto Company for the three years ending December 31, 2007? Explain.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter20: Corporations: Distributions In Complete Liquidation And An Overview Of Reorganizations

Section: Chapter Questions

Problem 36P

See similar textbooks

Similar questions

Olympic National Agencies was organized with an authorized capitalization of preferred stock and common stock. The articles of incorporation provided for a 7 percent annual dividend for the preferred stock. The articles further stated that the preferred stock would be given priority interests in the corporation’s assets up to the par value of the stock. Subsequently, the shareholders voted to dissolve Olympic. Olympic’s assets greatly exceeded its liabilities. The liquidating trustee petitioned the court for instructions on the respective rights of the shareholders in the assets of the corporation upon dissolution. The court ordered the trustee to distribute the corporate assets remaining after the preference of the preferred stock is satisfied to the common and preferred stockholders on a pro rata basis. Was the court correct in rendering this decision? Explain.
On July 1, 2022, when Christ Company's total stockholders' equity was $360,000, Dina Corporation purchased 14,000 shares of Christ's common stock at $30 per share. Christ had 20,000 shares of common stock outstanding both before and after the purchase by Dina, and the book value of Christ's net assets on July 1, 2022 was equal to the fair value. On a consolidated balance sheet prepared at July 1, 2022, goodwill would be:- A) $360,000 B) $420,000 C)$240,000 D) $600,000
On January 1, 2018, Enron Company purchased for cash 40 percent of Walt Company’s 450,000 shares of common stock for $1,800,000 when 40 percent of the equity in Walt’s net assets was $2,610,000. The payment in excess of book value was assigned to depreciable assets with a remaining life of six years. As a result of this transaction, Enron has the ability to control Walt’s operating and financial policies. Walt’s net income for the year ended December 31, 2018, was $900,000. During 2018, Walt paid $487,500 in dividends to its shareholders. What is the method, why, for consolidation and how much would be the income reported by Enron for its investment in Walt.
On May 1, Year 3, the board of directors of Boxer Industries declared a property dividend of 4,500 shares of King Corporation common stock that Boxer had purchased as an investment (book value: $58,500). The market value of the 4,500 King shares was $121,500 (or $27 per share) on the date of declaration and $180,000 (or $40 per share) on the date of distribution. What amount will be debited to Retained earnings in the journal entry recorded on the declaration date? amount debited to retained earnings on the date of declaration?
On January 1, Year 4, Pane Corp. exchanged 150,000 shares of its $20 par value common stock for all of Sky Corp.s common stock. At that date, the fair value of Panes common stock issued was equal to the fair value of the identifiable assets acquired and liabilities assumed. Both corporations continued to operate as separate businesses, maintaining accounting records with years ending December 31. In its separate statements, Pane accounts for the investment using the equity method. Information from separate company operations follows:PaneSkyRetained earnings -- 12/31/Yr 3$3, 200, 000$925,000 Dividends paid -- 3/25/Yr 4750, 000200, 000lf consolidated net income was $800,000, what amount of retained earnings should Pane report in its December 31, Year 4, consolidated balance sheet? A. $3,250,000B. $3,050,000C. $4, 125, 000D. $4, 925,000
Spartan Corporation redeemed 25 percent of its shares for $1,800 on July 1 of this year, in a transaction that qualified as an exchange under IRC §302(a). Spartan’s accumulated E&P at the beginning of the year was $1,800. Its current E&P is $16,300. Spartan made dividend distributions of $2,700 on June 1 and $6,000 on August 31. Determine the beginning balance in Spartan’s accumulated E&P at the beginning of the next year. See Revenue Rules 74-338 and 74-339 for help in making this calculation. (Round your intermediate calculations to the nearest whole dollar amount.)
Fast Ltd. is a public company that prepares its consolidated financial statements in accordance with IFRS. Its net income in Year 2 was $200,000, and shareholders' equity at December 31, Year 2, was $1,800,000. Mr. Lombardi, the major shareholder, has made an offer to buy out the other shareholders, delist the company, and take it private. Thereafter, the company will report under ASPE. You have identified the following two areas in which Fast's accounting principles differ between IFRS and ASPE. 1. Fast incurred research and development costs of $500,000 in Year 1. Thirty percent of these costs were related to development activities that met the criteria for capitalization as an intangible asset. The newly developed product was brought to market in January, Year 2 and is expected to generate sales revenue for 10 years. 2. Fast acquired equipment at the beginning of Year 1 at a cost of $100,000. The equipment has a five-year life with no expected residual value and is depreciated on a…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $461,000 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. TT Fair Values 1/1/20 $ Carrying Amounts BelAire Reporting Unit Cash 12/31/21 $ 89,000 189,750 218,750 776, 500 586,000 355,000 48,000 243,000 258,000 860,000 546,000 269,000 452,000 (184,000) (518,000) Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities (114,500) (591,500) Note: Parentheses indicate a credit balance. a. Prepare Alfonso's journal entry…
On July 1, 2023, Howe Corporation issues 2,000,000 shares of its common stock for all of Essex Corporation's outstanding shares and Essex is dissolved. The fair value of Howe's common stock on that date is $100 per share. The book values and fair values of the accounts for each corporation at March 1, 2019 are as follows: Assets Cash Accounts receivable - net Inventories Other current assets Plant assets Accumulated depreciation Total assets Liabilities and Stockholders' Equity Accounts payable Long-term debt Common stock ($1 par) Additional paid-in capital Retained earnings Total equities Howe Corporation Book Value $ 25,000,000 3,000,000 10,000,000 5,000,000 15,000,000 -6,000,000 $ 52,000,000 Fair Value $ 25,000,000 4,000,000 8,000,000 9,000,000 21,000,000 $ 14,000,000 $ 14,000,000 10,000,000 11,500,000 15,000,000 5,000,000 8,000,000 $ 52,000,000 Essex Corporation Fair Value Book Value $80,000,000 $80,000,000 20,000,000 20,000,000 20,000,000 25,000,000 10,000,000 9,000,000…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $455,000 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso’s stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire’s assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Fair Values1/1/20 Carrying Amounts12/31/21 Cash $ 92,000 $ 49,000 Receivables 208,250 244,000 Inventory 234,000 259,000 Patents 753,500 864,000 Customer relationships 597,250 576,000 Equipment (net) 397,500 297,000 Goodwill ? 410,000 Accounts payable (97,500 ) (187,000 ) Long-term liabilities (640,000 ) (542,000…
Alfonso Inc. acquired 100 percent of the voting shares of BelAire Company on January 1, 2020. In exchange, Alfonso paid $263,500 in cash and issued 100,000 shares of its own $1 par value common stock. On this date, Alfonso's stock had a fair value of $15 per share. The combination is a statutory merger with BelAire subsequently dissolved as a legal corporation. BelAire's assets and liabilities are assigned to a new reporting unit. The following shows fair values for the BelAire reporting unit for January 1, 2020 along with respective carrying amounts on December 31, 2021. BelAire Reporting Unit Cash Receivables Inventory Patents Customer relationships Equipment (net) Goodwill Accounts payable Long-term liabilities Note: Parentheses indicate credit balance. Fair Values 1/1/20 68,000 182,500 219,000 $ 371,500 603,500 404,500 ? (123,500) (524,000) Carrying Amounts $ 12/31/21 41,000 236,000 251,000 467,000 574,000 339,000 562,000 (188,000) (452,000) a. Prepare Alfonso's journal entry to…
Francisco Inc. acquired 100 percent of the voting shares of Beltran Company on January 1, 2017. In exchange, Francisco paid $450,000 in cash and issued 104,000 shares of its own $1 par value common stock. On this date, Francisco’s stock had a fair value of $12 per share. The combination is a statutory merger with Beltran subsequently dissolved as a legal corporation. Beltran’s assets and liabilities are assigned to a new reporting unit.The following reports the fair values for the Beltran reporting unit for January 1, 2017, and December 31, 2018, along with their respective book values on December 31, 2018.a. Prepare Francisco’s journal entry to record the assets acquired and the liabilities assumed in the Beltran merger on January 1, 2017.b. On December 31, 2018, Francisco opts to forgo any goodwill impairment qualitative assessment and estimates that the total fair value of the entire Beltran reporting unit is $1,425,000. What amount of goodwill impairment, if any, should Francisco…