Intermediate Accounting: Reporting and Analysis
2nd Edition
ISBN: 9781285453828
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 5, Problem 8C
To determine
Calculate the lifetime income of Corporation H and comment on the additional information that would be desired before making the investment decision.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Joseph Johnson established JJ Inc. in 2013. When he established the corporation, he exchanged $10,000 cash for 100% of the common shares with a Paid-Up Capital amount of $10,000. Early in 2015, Joseph transferred additional assets to the corporation. The assets he transferred consisted of a car he has been using as his personal automobile with a fair market value of $14,890 (adjusted cost basis of $9,000) and cash in the amount of $8,000. In exchange for these assets, he received stock with a Paid-Up Capital amount of $34,000.
What are the tax consequences to Joseph and to JJ Inc. of this 2015 transfer?
Problem:
The following transactions occurred at BBS Company in 2022.
1. The company purchased a new building for $258,000. A down payment of $43,000 was made. The balance is due in four equal
annual installments (plus interest) beginning July 1, 2023.
2. The company bought 1,000 shares of its own common stock for $13,000.
3. The company purchased as an investment $42,000 par value of Ridge Company's 8 percent bonds, maturing in five years. The
purchase price was $42,000.
Required:
Compute the company's net cash flow from investing activities. (Amounts to be deducted should be indicated with a minus sign.)
Journal Entries:
Purchase of investment in bonds
Purchase of new building
Purchase of treasury stock
Format:
Cash flows from investing activities
%24
Boxer Company owned 20,000 shares of King Company that were
purchased in 2016 for $500,000O. On May 1, 2018, Boxer declared
a property dividend of 1 share of King for every 10 shares of Boxer
stock. On that date, there were 50,000 shares of Boxer stock
outstanding. The market value of the King stock was $30 per share
on the date of declaration and $32 per share on the date of
distribution. By how much is retained earnings reduced by the
property dividend?
Chapter 5 Solutions
Intermediate Accounting: Reporting and Analysis
Ch. 5 - In general, how does the income statement help...Ch. 5 - Prob. 2GICh. 5 - Define income under the capital maintenance...Ch. 5 - Prob. 4GICh. 5 - What is net income?Ch. 5 - What three things must a company determine to...Ch. 5 - Prob. 7GICh. 5 - Prob. 8GICh. 5 - Prob. 9GICh. 5 - Give an example and explanation for each of the...
Ch. 5 - Define expenses. What do expenses measure?Ch. 5 - Prob. 12GICh. 5 - Define gains and losses. Give examples of three...Ch. 5 - Prob. 14GICh. 5 - What items are included in a companys income from...Ch. 5 - How are unusual or infrequent gains or losses...Ch. 5 - What is interperiod tax allocation?Ch. 5 - Prob. 18GICh. 5 - Prob. 19GICh. 5 - Prob. 20GICh. 5 - Prob. 21GICh. 5 - Prob. 22GICh. 5 - Prob. 23GICh. 5 - Prob. 24GICh. 5 - Prob. 25GICh. 5 - Prob. 26GICh. 5 - Prob. 27GICh. 5 - Prob. 28GICh. 5 - Prob. 29GICh. 5 - Prob. 30GICh. 5 - Prob. 31GICh. 5 - Prob. 32GICh. 5 - What is the rate of return on common equity? What...Ch. 5 - Prob. 34GICh. 5 - Prob. 35GICh. 5 - Which of the following is expensed under the...Ch. 5 - The following information is available for Cooke...Ch. 5 - The following information is available for Wagner...Ch. 5 - Prob. 4MCCh. 5 - A loss from the sale of a component of a business...Ch. 5 - In a statement of cash flows, receipts from sales...Ch. 5 - Brandt Corporation had sales revenue of 500,000...Ch. 5 - Refer to RE5-1. Prepare a single-step income...Ch. 5 - Shaquille Corporation began the current year with...Ch. 5 - Dorno Corporation incurred expenses during the...Ch. 5 - Niler Corporation reported the following after-tax...Ch. 5 - Jordan Corporation reported retained earnings of...Ch. 5 - Prob. 7RECh. 5 - Prob. 8RECh. 5 - Amelias Bookstore reported net income of 62,000...Ch. 5 - Prob. 10RECh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Prob. 3ECh. 5 - Cost of Goods Sold and Income Statement Schuch...Ch. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Prob. 7ECh. 5 - Prob. 8ECh. 5 - Prob. 9ECh. 5 - Prob. 10ECh. 5 - Prob. 11ECh. 5 - Prob. 12ECh. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - Prob. 16ECh. 5 - Prob. 17ECh. 5 - Classifications Where would each of the following...Ch. 5 - Prob. 19ECh. 5 - Common-Size Analyses Meagley Company presents the...Ch. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Prob. 23ECh. 5 - Prob. 24ECh. 5 - Prob. 25ECh. 5 - Prob. 26ECh. 5 - Prob. 1PCh. 5 - Prob. 2PCh. 5 - Prob. 3PCh. 5 - Prob. 4PCh. 5 - Financial Statement Violations of U.S. GAAP The...Ch. 5 - Rox Corporations multiple-step income statement...Ch. 5 - Prob. 7PCh. 5 - Prob. 8PCh. 5 - Prob. 9PCh. 5 - The following is an alphabetical list of accounts...Ch. 5 - Financial Statement Deficiencies The following is...Ch. 5 - Prob. 12PCh. 5 - Prob. 13PCh. 5 - Prob. 14PCh. 5 - Prob. 15PCh. 5 - Prob. 16PCh. 5 - Prob. 17PCh. 5 - Prob. 18PCh. 5 - Prob. 19PCh. 5 - Prob. 20PCh. 5 - Prob. 21PCh. 5 - Prob. 22PCh. 5 - Prob. 23PCh. 5 - Prob. 1CCh. 5 - Prob. 2CCh. 5 - Prob. 3CCh. 5 - Prob. 4CCh. 5 - Nonrecurring Items Lynn Company sells a component...Ch. 5 - Prob. 6CCh. 5 - Accrual Accounting GAAP requires the use of...Ch. 5 - Prob. 8CCh. 5 - Prob. 9CCh. 5 - Prob. 10CCh. 5 - Prob. 12C
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Pierson Corporation owned 10,000 shares of Hunter Corporation. These shares were purchased in 2011 for $90,000. On November 15, 2015, Pierson declared a property dividend of one share of Hunter for every ten shares of Pierson held by a stockholder. On that date, when the market price of Hunter was $28 per share, there were 90,000 shares of Pierson outstanding. What gain and net reduction in retained earnings would result from this property dividend? Gain = SWER Net reduction in R/E= 90,000+ 10x128= 9000 x 28 = 252 of $10 par value common stock outstand the market price of the st Aarrow_forwardOn January 1, two years ago, Parkway Corporation purchased all of the outstanding common stock of Shaw Company for $220,000 cash. On that date, Shaw's net assets had a book value of $148,000. Equipment with an 8-year life was undervalued by $20,000 in Shaw's financial records. Shaw has a database that is valued at $52,000 and will be amortized over ten years. Shaw reported net income of $25,000 in the year of acquisition and $32,500 in the following year. Dividends of $2,500 were declared and paid in each of those two years. The third year of operations is now complete. For each of the two companies, selected account balances as of December 31 for this third year are as follows: Revenues Expenses Equipment (net) Retained Earnings, beginning of the year Dividend Paid A. B. C. D. E. Parkway Shaw $ 250,000 $ 142,500 For each of the three methods discussed in the chapter, what should be the Investment in Shaw Company account balance in the records of Parkway Corporation at December 31 of…arrow_forwardIn September, an investor sold 300 shares of Semi-Tech Company, with an adjusted cost base (ACB) of $8,200, for net proceeds of $6,700. Two weeks later, the investor purchased another 300 shares of Semi-Tech for $7,200 and still holds them. In which of the following ways will the loss on the disposition of the shares be reported for 2011 income tax reporting purposes? O a) The investor will report a capital loss of $1,500. b) The investor will report a capital loss of $1,000. Oc) The investor will not report a capital loss. d) The investor will report a capital loss of $500.arrow_forward
- At the beginning of the year, the Sean Brewery purchased a 25 percent ownership interest in Mark Pub. The investment cost $12 million. At year-end, Mark Pub declared and paid cash dividends to shareholders totaling $320,000, after reporting earnings of $2.0 million. Calculate the book value of Sean’s equity investment in Mark Pub at year-end assuming that Sean Brewery reported a loss of $1.2 million instead of a profit of $2.0 million and still paid its dividend of $320,000.arrow_forwardStinson Corporation owned 30,000 shares of Matile Corporation. These shares were purchased in 2011 for $270,000. On November 15, 2015, Stinson declared a property dividend of one share of Matile for every ten shares of Stinson held by a stockholder. On that date, when the market price of Matile was $25 per share, there were 270,000 shares of Stinson outstanding. What gain and net reduction in retained earnings would result from this property dividend? Gain Net Reduction in Retained Earnings $0 $108,000 $513,000 $756,000 $432,000 $243,000 $432,000 $675,000arrow_forwardSaved Help On July 1, 2024, Clearwater Incorporated purchased 9,300 shares of the outstanding common stock of Mountain Corporation at a cost of $213,000. Mountain had 31,000 shares of outstanding common stock. The total book value and total fair value of Mountain's individual net assets on July 1, 2024, are both $710,000. The total fair value of the 31,000 shares of Mountain's common stock on December 31, 2024, is $765,000. Both companies have a January through December fiscal year. The following data pertains to Mountain Corporation during 2024: Dividends declared and paid, January 1-June 30 Dividends declared and paid, July 1-December 31 Net income, January 1-June 30 Net income, July 1-December 31 $ 12,100 $ 12,100 $ 14,100 $ 18,100 5 Required: 1. Prepare the necessary entries for 2024 under the equity method (other than for the purchase). 2. Prepare any necessary entries for 2024 (other than for the purchase) that would be required if the securities were accounted for under the fair…arrow_forward
- On 1 February 2011 PETA acquired 35% of the equity shares of AVO, its only associate, for $20,000,000 in cash. The post-tax profit of AVO for the year to 30 September 2011 was $6,000,000. Profits accrued evenly throughout the year. AVO made a dividend payment of $2,000,000 on 1 September 2011. At 30 September 2011, PETA decided that an impairment loss of $1,000,000 should be recognised on its investment in AVO. In PETA's separate financial statement, PETA did not recognize any impairment loss related to its investment in AVO. What amount will be shown as 'investment in associate' in the statement of financial position of PETA as at 30 September 2011? PLEASE EXPLAIN THE ANSWER. A) $20,350,000 B) $21,050,000 C) $21,750,000 D) $19,700,000 E) None of the abovearrow_forwardDuring 2023, Elisabeth Ltd. purchased 8,000 shares of Lilly of the Valley Corp. for $34 per share ($272,000 total). Elisabeth held these shares until September 2025, when it sold them for $42 per share. During these three years, Lilly of the Valley paid dividends of $2 per share on July 31. On Elisabeth's fiscal year-end (December 31), shares of Lilly of the Valley closed at $39, $30, and $46 in 2023, 2024, and 2025, respectively. Required Assume that the company designated half of the Lilly of the Valley shares as FVPL and the other half irrevocably elected to record fair value changes through OCI. Determine the amounts to be reported on Elisabeth's balance sheet and statement of comprehensive income with respect to the company's investment in Lilly of the Valley Corp. What do you observe about the total amount of retained earnings for the three years combined? Complete the analysis for 2024. Balance sheet Financial asset Equity: AOCI on Lilly of the Valley shares* Retained earnings…arrow_forwardMike Ltd purchased the outstanding voting shares of Sam Ltd at the beginning of 2009 for $387,000. At the time of purchase, Sam's total stockholders' equity amounted to $475,000. Income and dividend distributions for Sam from 2009 through 2011 are as follows: 2009 2010 2011 Net income(loss) $63,500 $52,500 $(55,000) Dividend distribution $25,000 $50,000 $35,000 Required: Prepare journal entries for Mike Ltd. from the date of purchase through 2011 to account for its in vestment in Sam Ltd under each of the following assu mptions: 1. Cost Method (assu me 20% investment) 2. Equity Method (assume 40% investment)arrow_forward
- Porter Corporation purchased 80% of the common stock of Salem Company for $850,000 on January 1, 2013. During the next three years, Salem had the following income and Dividends paid: Year Income Dividends 2013 $100,000 $25,000 2014 $110,000 $35,000 2015 $170,000 $60,000 Prepare the journal entries made under both methods and then compute the ending balance in the "investment" account under both methods.arrow_forwardBramble Corporation owned 35000 shares of Blossom Corporation. These shares were purchased in 2022 for $315000. On November 15, 2026, Bramble declared a property dividend of one share of Blossom for every ten shares of Bramble held by a stockholder. On that date, when the market price of Blossom was $27 per share, there were 315000 shares of Bramble outstanding. What gain and net reduction in retained earnings would result from this property dividend? O O Gain $0 $0 $567000 $567000 Net Reduction in Retained Earnings $283500 $850500 $126000 $283500arrow_forwardAt the beginning of 2022, Rose, Inc. purchased 8000 ordinary shares of Mark, Inc. for $800,000. The shares were designated as FVOCI investment. On July 31, 2022, Rose, Inc. sold all of its Mark, Inc.’s shares for $1,200,000. How much will be closed to Retained Earnings at the end of 2022 as a result of this sale?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License