Question

In: Accounting

As of January 1, 2019, the stock of Pace Corp. was owned as follows:                          Ellis     

As of January 1, 2019, the stock of Pace Corp. was owned as follows:

                         Ellis                                                     10 Shares

                        Vivacious (Ellis's spouse)                   30 Shares

                        Frank (Ellis' father)                             40 Shares

                        Herb (Frank’s brother)                       20 Shares

On December 31, 2019, Pace Corp. paid Vivacious $150,000 and she surrendered ten (10) shares of stock.

Immediately prior to the December 31 transaction, Vivacious’ total ownership interest in Pace Corp was equal to _____ percent, consisting of ___ shares owned directly and ___ shares owned indirectly.

Solutions

Expert Solution

Ans.=

In case of shares of a company, a person may hold such shares directly, or indirectly through a legal entity or a natural person(in which case, the person becomes the beneficial owner of the shares).

Hence, a person beneficially owns securities owned by his/her child, spouse, parent, grandparent, father in law, brother in law, son in law and daughter in Law.

Therefore,

In the above case, Vivacious will become the indirect shareholder or beneficial owner of the shares held by his spouse(Ellis) and father in law(Frank) which is equal to =

Shares of Ellis = 10 shares

Shares of Frank = 40 shares

=> Total Indirect holding = 50 shares

Also,

Total shares held directly by Vivacious = 30 shares

Hence,

Total Shares held by Vivacious = Direct + Indirect = 30 + 50 = 80 shares

Total shares of the company = 100 shares

So,

Percentage ownership of shares = 80 shares / 100 shares = 80%

Conclusion =

Immediately prior to the December 31 transaction, Vivacious’ total ownership interest in Pace Corp was equal to 80 percent, consisting of 30 shares owned directly and 50 shares owned indirectly.

=> I would be glad to receive a feedback or suggestion to the question answered above.

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ekkarill92 answered 2 years ago
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