PRINCIPLES OF TAXATION F/BUS...(LL)
PRINCIPLES OF TAXATION F/BUS...(LL)
23rd Edition
ISBN: 9781260433197
Author: Jones
Publisher: MCG
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Chapter 9, Problem 14QPD
To determine

Explain the reason for which Firm B should decide the block of stock to sell and reacquire.

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As a long-term investment at the beginning of the 2024 fiscal year, Florists International purchased 25% of Nursery Supplies Incorporated's 8 million shares of capital stock for $40 million. The fair value and book value of the shares were the same at that time. The company realizes that this investment typically would be accounted for under the equity method, but instead chooses to measure the investment at fair value. During the year, Nursery Supplies reported net income of $20 million and distributed cash dividends of $ 1.00 per share. At the end of the year, the fair value of the shares is $36 million. Required: How would this investment be classified on Florists' balance sheet? Prepare all appropriate journal entries related to the investment during 2024, under the fair value option, and in a manner similar to what Florists would use for investments in equity securities for which it does not have significant influence. Indicate the effect of this investment on 2024 income before…
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On June 15, 2020, Brainiac Company purchased 8 shares of Lovely Company for $6 per share. The investment represented less than 20% of the shares outstanding so it was a passive investment. Brainiac held the investment for the remainder of 2020, and at December 31 the market value was $4 per share. During 2021, Brainiac sold 3 shares of Lovely for $7 each and at the end of 2021, the market value of the remaining 5 shares was $9 each. What was the gain or loss on Brainiac's income statement for 2021? Indicate how much of the gain or loss is realized and how much is unrealized. Select one: a. $9 realized gain and $25 unrealized gain b. $3 realized gain and $15 unrealized gain c. $3 realized gain and $25 unrealized gain d. $9 realized gain and $15 unrealized gain

Chapter 9 Solutions

PRINCIPLES OF TAXATION F/BUS...(LL)

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