(4) Two unrelated individuals, Aaron & Burr, own the stock of ABC Corporation. ABC redeems all of Aaron's stock in a transaction that fits within the provisions of $302(a). ABC had earnings and profits equal to $80,000. The corporation's assets have a fair market value equal to $400,000 and liabilities equal to $280,000. (a) What is the proper amount, if any, of the reduction of ABC's earnings and profits if Aaron received a $60,000 check in exchange for her ABC stock? (b) What is the proper amount, if any, of the reduction of ABC's earnings and profits if the corporation's assets were worth $340,000, and Aaron received $30,000 in exchange for his X Corporation stock?
(4) Two unrelated individuals, Aaron & Burr, own the stock of ABC Corporation. ABC redeems all of Aaron's stock in a transaction that fits within the provisions of $302(a). ABC had earnings and profits equal to $80,000. The corporation's assets have a fair market value equal to $400,000 and liabilities equal to $280,000. (a) What is the proper amount, if any, of the reduction of ABC's earnings and profits if Aaron received a $60,000 check in exchange for her ABC stock? (b) What is the proper amount, if any, of the reduction of ABC's earnings and profits if the corporation's assets were worth $340,000, and Aaron received $30,000 in exchange for his X Corporation stock?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Ss.223.
Transcribed Image Text:(4) Two unrelated individuals, Aaron & Burr, own the stock of ABC Corporation. ABC
redeems all of Aaron's stock in a transaction that fits within the provisions of $302(a). ABC
had earings and profits equal to $80,000. The corporation's assets have a fair market value
equal to $400,000 and liabilities equal to $280,000.
T
(a) What is the proper amount, if any, of the reduction of ABC's earnings and profits if
Aaron received a $60,000 check in exchange for her ABC stock?
(b) What is the proper amount, if any, of the reduction of ABC's earnings and profits if the
corporation's assets were worth $340,000, and Aaron received $30,000 in exchange for
his X Corporation stock?
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