Sage Corporation Has Assets Worth $4,000,000 with an Adjusted Basis

question 9

Multiple Choice

Sage Corporation has assets worth $4,000,000 with an adjusted basis of $3,000,000.Ebony Corporation would like to acquire all of Sage's assets in a "Type C" reorganization in exchange for $2,800,000 of voting stock, $400,000 of cash, and assumption of Sage's liabilities of $800,000.All stock received by Sage will be distributed to its shareholders and Sage will then liquidate.Which, if any, of the following statements regarding this transaction is correct?

• A)Sage will realize a gain of $1,000,000 and recognize a gain of $0.
• B)Sage will realize a gain of $1,000,000 and recognize a gain of $400,000.
• C)Sage will realize a gain of $1,000,000 and recognize a gain of $800,000.
• D)Sage will realize a gain of $1,000,000 and recognize a gain of $1,000,000.
• E)None of the above statements is correct.

Comprehend how financing activities are reported and their impact on cash.

Understand the direct method for reporting cash flows from operating activities and calculate specific cash transactions based on changes in balance sheet accounts.

Identify how different types of transactions affect a company's cash balance.

Distinguish between the direct and indirect methods of reporting cash flows from operating activities.

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Definitions:

Childhood Sexuality

A concept in developmental psychology referring to the range of sexual feelings, behaviors, and developments that occur in children.

Feminist

Pertaining to or advocating for the rights and equality of women and seeking to address issues of gender inequality.

Psychosexual Theory

Sigmund Freud's theory that child development occurs in a series of stages, each characterized by different demands for sexual satisfaction.

Genital Stage

A phase in Freud's psychosexual development focused on mature sexual interests and activities, usually beginning in puberty.