Parent Corporation Owns All of Subsidiary Corporation's Stock

question 65

Multiple Choice

Parent Corporation owns all of Subsidiary Corporation's stock. In addition, Parent Corporation owns $100,000 (face amount and basis) of Subsidiary Corporation's bonds. When Subsidiary Corporation is completely liquidated, it distributes property with a $70,000 adjusted basis and a $100,000 FMV to Parent Corporation in redemption of the Subsidiary Corporation bonds. Following the liquidation, Parent Corporation will have a basis in the Subsidiary Corporation property received for the bonds of

• A)$0.
• B)$70,000.
• C)$100,000.
• D)none of the above

Identify and differentiate between various types of transactions and their impact on the accounting equation.

Recognize the definition, creation, and consequences of accounts payable and accounts receivable.

Grasp the concept of financial statements and their importance in displaying a company's financial position and performance.

Comprehend how changes in assets, liabilities, and stockholders' equity affect a company's financial statements.

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Definitions:

Internal Control Objectives

Aims to ensure the accuracy and reliability of financial reports, compliance with laws and regulations, and the effectiveness and efficiency of operations.

Financial Reports

Documents that present an organization's financial performance and position, typically including balance sheets, income statements, and cash flow statements.

Compliance

Refers to the act of following and adhering to rules, regulations, standards, or laws.

Voucher

Any document that serves as proof of authority to pay cash or issue an electronic funds transfer, but for many businesses is a special form used to record data about a liability and the details of its payment.