On August 27 of the current year, Bailey Corporation exchanged $25,000 of 4% interest-bearing bonds for 100 shares of its common stock worth $300 per share. If your answer amount is zero, enter "0". a. Does this transaction qualify as a nontaxable reorganization? If so, what is its type? b. What is the gain realized by the bondholders on the exchange? c. What is the gain recognized by the bondholders on the exchange? d. What is the basis in the stock that was received?
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- Question Content Area Exercise 7-18 (LO. 2) On August 27 of the current year, Bailey Corporation exchanged $25,000 of 4% interest-bearing bonds for 100 shares of its common stock worth $300 per share. If your answer amount is zero, enter "0". a. Does this transaction qualify as a nontaxable reorganization? If so, what is its type? b. What is the gain realized by the bondholders on the exchange?$fill in the blank 2 c. What is the gain recognized by the bondholders on the exchange?$fill in the blank 3 d. What is the basis in the stock that was received?$fill in the blank 4PROBLEM 2 The bank accepted an equity interest in Seal Company in the form of 200,000ordinary shares quoted at P12 per share. The par value is P10 per share. The fair value of the note payable on the date of restructuring is P2,200,000.Requirement:a. What amount should be recognized as gain from debt extinguishment as a resultof the equity swap? b. What amount should be recognized as share premium from issuance of theshares?V6. On January 1, Stunt Corp. had outstanding convertible bonds with a face value of $1,000,000 and an unamortized discount of $100,000. On that date, the bonds were converted into 100,000 shares of $1 par stock. The market value on the date of conversion was $12 per share. The transaction will be accounted for with the book value method. By what amount will Stunt’s stockholders’ equity increase as a result of the bond conversion?
- True or False. 1. The fixed assets are recorded in the corporation books at their gross book values. 2. 3. 4. 5. 6. 7. 8. 9. 10. The accounts receivable is recorded at net amount together with the allowance for doubtful accounts. The amount per share which a corporation agrees to pay, if it elects to redeem the stock, is called redemption price. If a corporation issues only one class of stock, this is the Preferred Stock. A corporation issuing preferred stock may at times reserve the right to redeem it later under specified conditions. Such stock is known as callable or redeemable preferred stock. There is always the possibility that a subscriber will pay part of the subscription price, and fails to pay the balance on the call date specified. In this case, the stockholder is considered to have defaulted, and the unpaid amount is called delinquent subscription. A subscriber is considered a stockholder and he possess all the rights of a stockholder. A corporation may reacquire some of…6. Assad Corporation repurchases 10,000 of its shares for $12 per share. The shares were originally issued at an average price of $10 per share. How much gain or loss should Assad report on its statement of comprehensive income as a result of this transaction? a.$0 b.$20,000 loss c.$100,000 gain d.$20,000 loss and $100,000 gain1. 2. 3. 1. 2. On August 1, 2025, Lane Corporation called its 10% convertible bonds for conversion. The $8,000,000 par bonds were converted into 320,000 shares of $20 par common stock. On August 1, there was $800,000 of the unamortized premium applicable to the bonds. The fair value of the common stock was $20 per share. Ignore all interest payments. No. Account Titles and Explanation 3. Packard, Inc. decides to issue convertible bonds instead of common stock. The company issues 10% convertible bonds, par $4,000,000, at 97. The investment banker indicates that if the bonds had not been convertible, they would have sold at 94. Gomez Company issues $9,000,000 of bonds with a coupon rate of 8%. To help the sale, detachable stock warrants are issued at the rate of ten warrants for each $1,000 bond sold. It is estimated that the value of the bonds without the warrants is $8,883,000 and the value of the warrants is $567,000. The bonds with the warrants sold at 101. Bonds Payable Premium on…
- If a corporation reissued at P200 per share 100 shares of treasury stock that it had previously acquired for P280 per share and there wasn’t any Share Premium-Treasury it would debit a. Loss on Sale of Treasury Stock for P8,000 b. Share Premium-Ordinary for P8,000 c. Retained Earnings for P8,000 d. Treasury stock for P8,000 What letter has the right answer? Explain each why the other choices is not the answer.14 - On 04.05.2020, our enterprise sold 1,000 shares of Kardemir A.Ş., which it had purchased for a temporary investment of 12 TL, for 10 TL each, after paying a commission of 250 TL to the relevant bank, the remaining amount was deposited into the bank account of the enterprise. Which of the following calculations is incorrect? a) 110 Stocks Hs. 12.000 TL Creditor B) 655 Securities Sales Losses Hs. 2.000 TL Debt NS) 653 Commission Expenses Hs. 250 TL Borrowed D) 102 Banks Hs. 9.750 TL Borrowed TO) 655 Securities Sales Losses Hs. 2.000 TL Creditor1. Athletic Accessories has the following transactions related to investments in common stock. How will each of these transactions, including an adjustment on December 31 for the investment's fair value, affect the financial statements? May 1: Purchases 5,700 shares (insignificant influence) of Endurance Wear common stock for $23 per share. June 30: Receives a cash dividend of $1 per share. Oct 18: Sells 2,700 shares of Endurance Wear common stock at $26 per share. Dec 31: Adjusts the investments to fair value. The fair value of Endurance Wear common stock is now $30 per share. Increase investments; decrease cash Increase investments; increase revenue :: Increase cash; decrease investments :: Increase investments; decrease cash :: Increase investments; increase revenue :: Increase cash; increase revenue
- Question 2 For the year ended 30 June 2020, Murray Ltd had a net profit after tax of $3,300,000. Details of the shares and other financial instruments outstanding are as follows: On 1 July 2019 Murray Ltd had 600,000 fully paid ordinary shares. • 300,000 fully paid ordinary shares were issued on 1 November 2019 at the prevailing market price. • 75,000 fully paid ordinary shares were bought back on 1 May 2020 at the prevailing market price. • 210,000 partly paid ordinary shares were issued on 1 May 2020 at a price of $6.00. The shares were partly paid to $4.50 and carried the right to participate in dividends in proportion to the amount paid as a fraction of the issue price. • For the entire year, 3 million $3.00 preference shares were held which provided a dividend at a rate of 5% per annum. • The preference shares are convertible at a rate of 1 ordinary share for every 4 preference shares. There are options to purchase 60,000 ordinary shares at a price of $15. For the year ended 30…1. Richmond Co. sold convertible bonds at a premium. Interest is paid on May 31 andNovember 30. On May 31, after interest was paid, 100, $1,000 bonds are tendered forconversion into 3,000 shares of $10 par value ordinary shares that had a market price of$40 per share. How should Richmond Co. account for the conversion of the bonds intoordinary shares under the book value method? Discuss the rationale for this method. 2. Wilson's Corporation is one of your new audit clients. The corporation's accountant isuncertain how to report earnings per share in accordance with IFRS and is requesting thatyou provide the following information:Define the term 'earnings per share' as it applies to a corporation with a capitalizationstructure composed of only one class of ordinary shares. Explain how earnings per shareshould be computed and how the information should be disclosed in the corporation'sfinancial statements.- What is the unrealized gain (loss) reported in profit or loss for the year 2021?A. P31,000B. (P31,000)C. P43,000D. (P43,000) - How much was the gain or loss on the sale of CD shares? A. P1,100 gain B. P2,000 gain C. P15,000 loss D. P15,900 loss