P14-52 - Sam Rogers forms a corporation. Sam transfers to the corporation property having a basis to him of $15,000 and a fair market value of $27,000 for 900 shares of the $10 par stock of the corporation. A year later, Bill Morrison, who is not related to Sam, transfers property having a basis to him of $1,000 and a fair market value of $3,000 for 100 shares of the corporate stock. The corporation issued no other stock. a.
At the time of the issuance the common stock was trading at $15 per share, and the preferred stock value is unknown. ABC pays no dividend in 2008 or 2009, and they decide to pay $90,000 in dividends in at the end of 2010. Prepare the necessary journal entries to record the issuance. Cash $2,000,000 Common Stock $100,000 APIC-C.S. $1,400,000 Preferred Stock $200,000 APIC-P.S.
$24,000 B. $75,000 C. $99,000 D. $51,000 E. $80,000 Difficulty: Easy 3. On January 1, 2008, Pacer Company paid $1,920,000 for 60,000 shares of Lennon Co.'s voting common stock which represents a 45% investment. No allocation to goodwill or other specific account was made. Significant influence over Lennon was achieved by this acquisition.
This was the initial amount invested by two of Neverfail founding employees. 4,796,000 shares of common stock were issued at $0.01 par value. After Angel Investment: According to the case, George Lawrence and another Seattle Angel acquired 800,000 shares of convertible preferred stock at $1 per share. This gives a total of $800,000. With this new development, if we assume that the previous 4,796,000 shares of common stock that were originally issued in March of 1993 are now also worth $1 per share, this gives a total of $4,796,000.
Present Value | Rate per period | 2.246 | 0.552 | | Cash Inflow | 8000 | 10000 | | Present Value | 17968 | 5520 | 23488 | 2. Cash flow calculations and net present value On January 2, 20X1, Bruce Greene invested $10,000 in the stock market and purchased 500 shares of Heartland Development, Inc. Heartland paid cash dividends of $2.60 per share in 20X1 and 20X2; the dividend was raised to $3.10 per share in 20X3. On December 31, 20X3, Greene sold his holdings and generated proceeds of $13,000. Greene uses the net-present- value method and desires a 16% return on investments. a.
Chapter 2 Problems 33. Assumption A: If the company were a sole proprietorship, all operating income and expenses on Schedule C of an individual return. The long term capital gain would be taxed on the individual return as well, at a maximum rate of 15%. Assumption B: If the company were a corporation, income and expenses would be taxed at the corporate level and reported on Form 1120. No special tax rates for capital gains apply to corporations, the entire gain is included in income subject to normal corporate rates.
CASE STUDY QUESTIONS Warren E Buffett 2005 1. Market reaction: What does the stock market seem to say about the acquisition of PacifiCorp by Berkshire Hathaway? Specifically, does the deal create value? If so, for which party? What does the $2.55 billion increase in Berkshire Hathaway’s market value represent?
For example, buy $100 par of the 1-year, 6%coupon bond for $99 and sell the synthetic portfolio consisting of $3 par of the 0.5-year zero and $103 par of the 1-year zero for $100.1692, making $1.1692 arbitrage profit. d) What is the 1-year par rate, i.e., what coupon rate would make the price of
|$1,200 gain and $180 tax. | The gain realized is $500 (100 shares x $20) less basis (100 shares x $15 exercise price). The tax is calculated as follows: $500 x 15% (preferential rate). Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $10 per share) from his employer. At the time he started working the stock price was $11 per share.