Williams Industries has outstanding 30 million common shares, 20 million Class A shares, and 20 million Class B shares. Williams has the right but not the obligation to repurchase the Class A shares if a change in ownership of the voting common shares causes J. P. Williams, founder and CEO, to have less than 50% ownership. Williams has the unconditional obligation to repurchase the Class B shares upon the death of J. P. Williams. Required: Which, if any, of the shares should be reported in Williams’ balance sheet as liabilities? Explain.

Williams Industries has outstanding 30 million common shares, 20 million Class A shares, and 20 million Class B shares. Williams has the right but not the obligation to repurchase the Class A shares if a change in ownership of the voting common shares causes J. P. Williams, founder and CEO, to have less than 50% ownership. Williams has the unconditional obligation to repurchase the Class B shares upon the death of J. P. Williams. Required: Which, if any, of the shares should be reported in Williams’ balance sheet as liabilities? Explain.

SWFT Corp Partner Estates Trusts

42nd Edition

ISBN:9780357161548

Author:Raabe

Publisher:Raabe

Chapter7: Corporations: Reorganizations

Section: Chapter Questions

Problem 13CE

See similar textbooks

Similar questions

ABC co. is a Canadian controlled private corporation that acquired 100% of the shares of XYZ Co. in Year 1 for $50,000. New Co., an arm's length corporation, is now interested in purchasing ABC Co.'s investment in XYZ Co.'s shares are currently worth $400,000 and the retained earnings of the company are $100,000. To reduce the fair market value of the shares, XYZ Co. will pay a dividend of $350,000 to ABC Co. and ABC Co. will then sell the shares to New Co. for $50,000 XYZ Co.'s RDTOH balances are nil. Applying the anti-avoidance rules of Subsection 55(2), what is the tax effect of the $350,000 dividend?
Williams Industries has outstanding 30 million common shares, 20 million Class A shares, and 20 million Class B shares. Williams has the right but not the obligation to repurchase the Class A shares if a change in ownership of the voting common shares causes J. P. Williams, founder and CEO, to have less than 50% ownership. Williams has the unconditional obligation to repurchase the Class B shares upon the death of J. P. Williams.Required:Which, if any, of the shares should be reported in Williams’s balance sheet as liabilities? Explain.
On January 2, 2020, Megan, INC. acquired a 15% interest in Kiyosaki Corp. by paying P8, 000, 000 for 100,000 ordinary shares. On this date, the net assets of Kiyosaki Corp. totaled P40, 000, 000. The fair values of Kiyosaki Corp.'s identifiable assets and liabilities were equal to their book values. Megan did not have the ability to exercise significant influence over the operating and financial policies of Kiyosaki. Megan received dividends of P1.40 per share from Kiyosaki on October 1, 2020. Kiyosaki reported net income of P5, 000, 000 for the year ended December 31, 2020. Megan classified the investment as at fair value through other comprehensive income. Market price for the 100,000 shares was P9, 000, 000 on December 31, 2020.Megan paid P30, 000, 000 on January 1, 2021, for 300,000 additional Kiyosaki ordinary shares, which represents a 25% interest in Kiyosaki. The fair value of Kiyosaki Corp.'s identifiable assets, net of liabilities, was equal to their book values of P92, 000,…
Webster Corporation acquired 25% of the outstanding common stock of Digest Inc. on January 1, 2022. The purchase price was $2,300,000 for 60,000 shares. Digest declared and paid a $1.10 per share cash dividend on June 30, 2022. The fair market value of the Digest stock at the end of 2022 is $42 per share. Webster can not exert significant influence over Digest and accounts for the investment as an equity investment. This is Webster's only equity investment. At December 31, 2022 the investment asset will be reported on Webster's balance sheet at what amount? $2,300,000 $2,484,000 $2,520,000 $2,434,000
On January 2, 2020, Megan, INC. acquired a 15% interest in Kiyosaki Corp. by paying P8, 000, 000 for 100,000 ordinary shares. On this date, the net assets of Kiyosaki Corp. totaled P40, 000, 000. The fair values of Kiyosaki Corp.'s identifiable assets and liabilities were equal to their book values. Megan did not have the ability to exercise significant influence over the operating and financial policies of Kiyosaki. Megan received dividends of P1.40 per share from Kiyosaki on October 1, 2020. Kiyosaki reported net income of P5, 000, 000 for the year ended December 31, 2020. Megan classified the investment as at fair value through other comprehensive income. Market price for the 100,000 shares was P9, 000, 000 on December 31, 2020.Megan paid P30, 000, 000 on January 1, 2021, for 300,000 additional Kiyosaki ordinary shares, which represents a 25% interest in Kiyosaki. The fair value of Kiyosaki Corp.'s identifiable assets, net of liabilities, was equal to their book values of P92, 000,…
Aaron owns 100 percent of the 12,000 shares of Veritable, Inc. The Investment in Veritable account has a balance of $588,000, corresponding to the subsidiary’s unamortized acquisition-date fair value of $49 per share. Veritable issues 3,000 new shares to the public for $50 per share. How does this transaction affect the Investment in Veritable account?a. It is not affected because the shares were sold to outside parties.b. It should be increased by $2,400.c. It should be increased by $3,000.d. It should be decreased by $117,600.
You work for an accountancy firm. You have been asked to provide advice to clients about the following transactions:On 1 October 2022, Shikipisha, a listed company, purchased 90% of the ordinary shares of Allan. Allan, which ceased trading one week prior to the share purchase, owns a manufacturing facility comprising of land and buildings as well as related equipment.The fair value of the land and buildings is similar to the fair value of the equipment. The acquisition of Allan only gained legal approval on the basis that all employees who worked at the facility are retained. There are no other assets, including any inventories, or processes transferred as part of the sale.Shikipisha proposes to account for the purchase of Allan as a business combination.Required:Advise whether the proposed treatments of the above two transactions are in accordance with IFS Standards.
Rio Tinto Limited has decided to sell its shale coal part of the business by establishing a new limited liability company to be known as Shoal Limited. Shoal Limited will be a listed corporation on the ASX. Rio Tinto and Shoal decide to issue the new shares at $2.65. (i) Shoal Limited will be a limited liability company. What are the rights and financial obligations of shareholders that purchase shares in the company? ii) One year later, Shoal Limited plans to expand its operations and seek to raise capital to do so. The company advisers recommend that the board of directors choose between a private placement or initial public offering. Explain each of these funding alternatives and discuss the advantages and disadvantages of each alternative.
Choose the correct. McKinley, Inc., owns 100 percent of Jackson Company’s 45,000 voting shares. On June 30, McKinley’s internal accounting records show a $192,000 equity method adjusted balance for its investment in Jackson. McKinley sells 15,000 of its Jackson shares on the open market for $80,000 on June 30. How should McKinley record the excess of the sale proceeds over its carrying amount for the shares?a. Reduce goodwill by $64,000.b. Recognize a gain on sale for $16,000.c. Increase its additional paid-in capital by $16,000.d. Recognize a revaluation gain on its remaining shares of $48,000.
Watkins, Inc. acquires all of the outstanding stock of Glen Corporation on January 1, 2020. At that date, Glen owns only three assets and has no liabilities: BookValue FairValue Land $ 40,000 $ 50,000 Equipment (10-year life) 80,000 75,000 Building (20-year life) 200,000 300,000 If Watkins pays $450,000 in cash for Glen, what amount would be represented as the subsidiary’s Building in a consolidation at December 31, 2022, assuming the book value of the building at that date is still $200,000?
X, Inc. is negotiating with Y, Inc. to acquire 100% of X, Inc.'s share capital. X, Inc. is currently owned by Y, Inc. and meets the definition of business defined in IFRS 3. The sale of shares is subject to approval by X, Inc.'s shareholders and the government. Because the agreement takes time, prior to the sale of shares, X, Inc and Y, Inc entered into an agreement that: Both parties settle it legally with the consent of the necessary agreements; Determine the purchase price; Determined that the following decisions and actions may be taken by Y, Inc. only with X, Inc's approval until the sale of shares, through: o Changes in the management of Z, Inc; o Dividend payment; and, o New project contracts that exceed IDR 200 billion. Does X, Inc control Z, Inc as a result of this agreement?
Belden, Incorporated, acquires 30 percent of the outstanding voting shares of Sheffield, Incorporated, on January 1, 2023, for $316,000, which gives Belden the ability to significantly influence Sheffield. Sheffield has a net book value of $796,000 at January 1, 2023. Sheffield's asset and liability accounts showed carrying amounts considered equal to fair values, except for a copyright whose value accounted for Belden's excess cost over book value in its 30 percent purchase. The copyright had a remaining life of 16 years at January 1, 2023. No goodwill resulted from Belden's share purchase. Sheffield reported net income of $192,000 in 2023 and $232,000 of net income during 2024. Dividends of $64,000 and $96,000 are declared and paid in 2023 and 2024, respectively. Belden uses the equity method. Required: a. On its 2024 comparative income statements, how much income would Belden report for 2023 and 2024 in connection with the company's investment in Sheffield? b. If Belden sells its…