Parent Corporation Owns 70% of Sam Corporation's Single Class of Stock

question 21

Multiple Choice

Parent Corporation owns 70% of Sam Corporation's single class of stock. This year, Parent Corporation purchases for cash the remaining 30% of Sam Corporation's stock from four individual investors pursuant to a tender offer. A plan of liquidation is approved by Sam Corporation's shareholders during the last month of this year, and Sam Corporation's assets are distributed by year-end to Parent Corporation in exchange for all of Sam's outstanding stock. Parent Corporation should

• A)not recognize any gains and losses on the redemption.
• B)recognize gains and losses on the redemption.
• C)recognize gains but not losses on the redemption.
• D)recognize losses but not gains on the redemption.

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Definitions:

Heated Reactions

Chemical reactions that require the addition of heat energy to proceed or to increase the rate of the reaction.

Temperature Dependence

Describes how the properties of substances change as the temperature changes, affecting reactions, phases, and physical properties.

Insect Activity

The behavioral patterns and physical actions of insects, including feeding, reproduction, and movement.

Growth Rate

The rate at which the quantity of something, such as an organism, population, or economy, increases over time.