Allen, Barker, and Cooper are cosureties on a $750,000 loan by Durham National Bank to Kingston Manufacturing Co., Inc. The maximum liability of the sureties is as follows: Allen, $750,000; Barker, $300,000; and Cooper, $150,000. If Kingston defaults on the entire $750,000 loan, what are the liabilities of Allen, Barker, and Cooper?

On January 1, 2020, Flower Corp. enters into an agreement with Nicki Rentals Inc. to lease a machine from them. Both corporations adhere to ASPE. The following data relate to the agreement:(i)  The term of the non-cancellable lease is three years with no renewal option. Payments of $ 543,244 are due on December 31 of each year.(ii)   The fair value of the machine on January 1, 2020, is $ 1,400,000. The machine has a remaining economic life of 10 years, with no residual value. The machine reverts to the lessor upon the termination of the lease.(iii)    Flower depreciates all its machinery on a straight-line basis. (iv)    Flower’s incremental borrowing rate is 10%. Flower does not have knowledge of the 8% implicit rate used by  Nicki. (v)     Immediately aftersigning the lease, Nicki discovers that Flower is the defendant in a lawsuit that is sufficiently material to make collectability of future lease payments doubtful.   From Flower’s viewpoint, what type of lease is this?…

Z owns a rental building (its only asset) with a gross fair market value of $5,000 subject to the non-recourse mortgage of $2,000. Z’s adjusted basis for this building is $1,500. All of Z’s stock is owned by C, whose basis for his stock in Z is $500. Z had 1,000 of E&P. Z is on the accrual method of accounting and reports on the calendar year. Assume that the corporate tax payable by Z on $3,500 gained is $735 and on $3,000 gained is $630. Z sells the building, subject to the mortgage, to D in the current year for $3,000 in cash. Z then liquidates, distributing all of the cash (remaining after paying its taxes) to C in cancellation of C’s stock in the current year.   a. Z’s gain on the sale of the building is $1,500.   b. Z’s E&P goes over to purchaser, D, if D is a corporation.   c. Section 331 treats C as selling its stock to Z.   d. None of the above

am. 117.

Scupper Farms, the lessee, and Tyrrell Equipment, the lessor, sign a lease agreement on January 1, 2019, that provides for Scupper to lease a cultivator from Tyrrell. The lease terms, provisions, and other related events are as follows: The lease is noncancelable and has a term of 6 years. The annual rentals are $55,000 payable at the beginning of each year. Scupper agrees to pay all executory costs directly to a third party, which are expected to be $1,100 annually, including property taxes of $500, insurance of $350, and maintenance of $250. These costs are paid each year on November 1. The cultivator has an estimated economic life of 6 years. Scupper guarantees a residual value of $60,000 at the end of 6 years. Scupper believes it is probable that it will pay $15,000 cash as a result of this guarantee. The interest rate implicit in the lease is 14%, which is known by Scupper. Scupper’s incremental borrowing rate is 15%, and it uses the sum-of-the-years’-digits method to record…

Assume that on January 1, 2021, Fredder Corporation sells equipment to Finance Co. for $1,700,000 and immediately leases back the equipment. The relevant information is as follows. 1. The equipment was carried on Fredder's books at a value of $1,500,000. 2. The term of the non-cancelable lease is 3 years; title will not transfer to Fredder, and the expected residual value at the end of the lease is $125,000, all of which is unguaranteed. 3. The lease agreement requires equal rental payments of $277,635 at the beginning of each year. 4. The incremental borrowing rate for Fredder is 7%. Fredder is aware that Finance set the annual rental to ensure a rate of return of 7%. 5. The equipment has a fair value of $1,700,000 on January 1, 2021, and an estimated economic life of 10 years. What type of lease is this for Fredder? What type of lease is this for Finance? Explain briefly. Prepare all necessary journal entries for the lessee for 2021. Prepare the 1/1/22 journal entry for the lessee.…

Pharoah Co. bought equipment and immediately leased it to Riggs Company on May 1, 2021. At that time the collectibility of the lease payments was not probable. The lease expires on May 1, 2022. Riggs could have bought the equipment from Pharoah for $5950000 instead of leasing it. Pharoah's accounting records showed a book value for the equipment on May 1, 2021, of $4450000. Pharoah's depreciation on the equipment in 2021 was $650000. During 2021, Riggs paid $1308000 in rentals to Pharoah for the 8- month period. Pharoah incurred maintenance and other related costs under the terms of the lease of $109000 in 2021. After the lease with Riggs expires, Pharoah will lease the equipment to another company for two years. The income before income taxes derived by Pharoah from this lease for the year ended December 31, 2021, should be O $650000. O $1308000. O $549000. O $1191000.

Before any debt cancellation, PeppersCo holds business land with a $2,400,000 fair market value, a $1,000,000 tax basis, and a related mortgage of $3,000,000. The lender reduces the mortgage principal by $600,000. What are the Federal income tax consequences of the debt cancellation given the following independent scenarios? A, Peppers is insolvent, and the land and related mortgage are the only asset and debt, respectively. B. the mortgage is seller financing, and Peppers is solvent. C. Peppers has filed for bankruptcy and the debt is discharged by that action.