Smith and Roberson's Business Law
16th Edition
ISBN: 9781285428253
Author: Richard A. Mann, Barry S. Roberts
Publisher: Cengage Learning
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Chapter 36, Problem 6Q
Summary Introduction
To discuss: The decision of minority shareholder on the purchase of both company G and Company B by Company ZS
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On August 31, 2019, Brown Corporation purchased 90% shares of Owen Company's
common stock for $6,500,000 cash. On January 1, 2019, Owen Company had common
stock of $4,500,000 and retained earnings of $1,800,000. The balance sheet information
available for Owen Company on August 31, 2019, showed the following:
Book Value
Fair Value
Inventory (FIFO)
$1,300,000
$1,500,000
Equipment (net)
1,900,000
1,500,000
Land
3,000,000
3,000,000
The equipment had a remaining useful life of ten years. Owen Company reported
$240,000 of net income in 2019 and declared $60,000 on December 1 of the year.
Required:
Prepare the workpaper entries on December 31, 2019 assuming the full equity method is
used.
:39
The X Corporation manufactures machine tools. The five directors of X Corporation are Black, White, Brown, Green, and Crimson. At a duly called meeting of the board of directors of X Corporation in January, all five directors were present. A contract for the purchase of $10 million worth of steel from the D Company, of which Black, White, and Brown are directors, was discussed and approved by a unanimous vote. The board also discussed at length entering into negotiations for the purchase of Q Corporation, which allegedly was about to be sold for around $150 million. By a three-to-two vote, it was decided not to open such negotiations.Three months later, Green purchased Q Corporation for $150 million. Shortly thereafter, a new board of directors for X Corporation took office. X Corporation now brings actions to rescind its contract with D Company and to compel Green to assign to X Corporation his contract for the purchase of Q Corporation. Explain whether X corporation should succeed on…
Companies A and B differ only in their capital structure. A is financed 30% debt and 70% equity: B is financed 10% debt and 90% equity. The debt of both companies is risk-free.
a. Rosencrantz owns 1% of the common stock of A. What other investment package would produce identical cash flow for Rosencrantz?
b. Guildenstern owns 2% of common stock of B. What other investment package would produce identical cash flows for Guildenstern?
Chapter 36 Solutions
Smith and Roberson's Business Law
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