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

Recognize the impact of treasury stock transactions on stockholders' equity.

Understand the accounting for and effects of restrictions/appropriations of retained earnings.

Distinguish between public and private corporations based on stock characteristics.

Grasp the effects of correcting errors on retained earnings and how to calculate year-end balances.

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Definitions:

Identity Theft

The fraudulent acquisition and use of a person's private identifying information, usually for financial gain.

Self-Defense

A legal defense theory that allows an individual to use reasonable force to protect themselves from harm.

Criminal Liability

The legal responsibility for actions that breach the laws which dictate prohibited conduct, potentially resulting in prosecution and punishment.

Criminal Liability

The legal responsibility that a person or organization has for committing a criminal offense, subjecting them to penal sanctions.