Question
In: Accounting
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI)....
Amy and Brian were investigating the acquisition of a tax
accounting business, Bottom Line Inc. (BLI). As part of their
discussions with the sole shareholder of the corporation, Ernesto
Young, they examined the company's tax accounting balance sheet.
The relevant information is summarized as follows:
| FMV | Adjusted Basis | Appreciation | ||||||
| Cash | $ | 26,000 | $ | 26,000 | ||||
| Receivables | 20,700 | 20,700 | ||||||
| Building | 108,500 | 54,250 | 54,250 | |||||
| Land | 281,250 | 93,750 | 187,500 | |||||
| Total | $ | 436,450 | $ | 194,700 | $ | 241,750 | ||
| Payables | $ | 24,600 | $ | 24,600 | ||||
| Mortgage* | 138,750 | 138,750 | ||||||
| Total | $ | 163,350 | $ | 163,350 | ||||
* The mortgage is attached to the building and land.
Ernesto was asking for $518,350 for the company. His tax basis in the BLI stock was $122,000. Included in the sales price was an unrecognized customer list valued at $162,000. The unallocated portion of the purchase price ($83,250) will be recorded as goodwill. (Negative amounts should be indicated by a minus sign.)
a. What amount of gain or loss does BLI recognize if the transaction is structured as a direct asset sale to Amy and Brian? What amount of corporate-level tax does BLI pay as a result of the transaction?
b. What amount of gain or loss does Ernesto recognize if the transaction is structured as a direct asset sale to Amy and Brian, and BLI distributes the after-tax proceeds [computed in part (a)] to Ernesto in liquidation of his stock?
- c1. What are the tax benefits, if any, to Amy and Brian as a result of structuring the acquisition as a direct asset purchase?
- c2. What is the tax basis in the assets received by Amy and Brian?
Solutions
ekkarill92 answered 4 months agoRelated Solutions
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom Line Inc. (BLI)....
Amy and Brian were
investigating the acquisition of a tax accounting business, Bottom
Line Inc. (BLI). As part of their discussions with the sole
shareholder of the corporation, Ernesto Young, they examined the
company's tax accounting balance sheet. The relevant information is
summarized as follows:
FMV
Adjusted Basis
Appreciation
Cash
$
10,000
$
10,000
Receivables
15,000
15,000
Building
100,000
50,000
50,000
Land
225,000
75,000
150,000
Total
$
350,000
$
150,000
$
200,000
Payables
$
18,000
$
18,000
Mortgage*
112,000
112,000...
Amy and Brian were investigating the acquisition of a tax accounting business, Bottom line Inc. (BLI)....
Amy and Brian were investigating the acquisition of a tax
accounting business, Bottom line Inc. (BLI). As part of their
discussions with the sole shareholder of the corporation, Ernesto
Young, they examined the company's tax accounting balance sheet.
the relevant information is summarized as follows:
FMV Adjusted Basis Appreciation
Cash $10,000 $10,000
Receivable 15,000 15,000 50,000
Building 100,000 50,000 100,000
Land 225,000 75,000 150,000
Total $350,000 $150,000 $200,000
Payables $18,000 $18,000
Mortgage 112,000 112,000
Total $130,000 $130,000
The...
As financial manager of Corton Inc., you are investigating a possible acquisition of Denham. You have...
As financial manager of Corton Inc., you are investigating a
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Corton
Denham
Forecast earnings per share
$
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$
1.30
Forecast dividend per share
$
4.68
$
.69
Number of shares
2,400,000
2,000,000
Stock price
$
90
$
20
You estimate that investors expect a steady growth of about 6%
in Denham’s earnings and dividends. Under new management, this
growth rate would be increased to 7.47%...
As financial manager of Corton Inc., you are investigating a possible acquisition of Denham. You have...
As financial manager of Corton Inc., you are investigating a
possible acquisition of Denham. You have the basic data given in
the following table.
Corton
Denham
Forecast earnings per share
$
6.80
$
1.80
Forecast dividend per share
$
4.08
$
.96
Number of shares
1,900,000
1,500,000
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90
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20
You estimate that investors expect a steady growth of about 6%
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Subject : Accounting Information System Question : The revenue cycle affects the bottom line of the...
Subject : Accounting Information System
Question : The revenue cycle affects the bottom line of the
business critically. Hence, there are many threats that could
derail a successful cycle. Describe 5 threats that may hinder this
sequence and its compensating controls for each threat.
The revenue cycle affects the bottom line of the business critically. Hence, there are many threats...
The revenue cycle affects the bottom line of the business
critically. Hence, there are many threats that could derail a
successful cycle. Describe 5 threats that may hinder this sequence
and its compensating controls for each threat. My question is what
are the four PROCESSES for this question? And how does it relate to
AIS. I do not need the answer for the threats but i do need the 4
processes.
Using the information below, complete the tax form 1040 above. Brian and Sheila Williams were married...
Using the information
below, complete the tax form 1040 above.
Brian and Sheila Williams were married in October of 2008. They
live at 1000 Main Street, Atlanta, GA 33127. Brian is a postal
service worker. Sheila is a teacher at Grady High School. Brian’s
social security number is 555-11-1111 and Sheila’s social security
number is 555-22-2222. They have a dependent daughter Jayla who is
10 years old (Born on May 12th). Jayla’s social security number is
555-33-3333. In 2016, Brian's...
Suppose you were investigating this research question: What is the impact of state tax and regulatory...
Suppose you were investigating this research question:
What is the impact of state tax and regulatory policy on
long run (10 years or more) state economic growth?
1. Express a simple equation expressing the functional
relationship (construct) of this research question along with other
possible influences on long run state economic growth. What is the
dependent variable, (causal) independent variables of main
interest, and control variables?
2. What might be a way to specifically measure (operationalize)
the dependent variable?
3....
1. Triple bottom line accounting ? can lower the quality of a company's performance provides less...
1. Triple bottom line accounting ?
can lower the quality of a company's performance
provides less financial information than single bottom line
accounting
is widely used in public sector accounting.
No answer text provided.
2. The profitability of a company is likely to decrease when
goals in such areas as ethical sourcing, recycling, diversity, and
philanthropy are set.
True
False
Explain how changes in the business environment might impact upon the triple bottom line in these...
Explain how changes in the business environment might
impact upon the triple bottom line in these organisations
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