Pane Adobe 6. Purple Corporation is acquiring Gray Corporation in a transaction that qualities as a $368 reorganization by exchanging $650,000 of stock and three parcels ((Parcel 1 FMV $350,000 - Basis $50,000); (Parcel 2 FMV $250,000 - Basis $100,000); (Parcel 3 FMV $400,000 - Basis $275,000 for all of Gray's assets (Stock-$450,000 and land (FMV of $500,000 and basis of $350,000) and liabilities of $175,000. Gray also has 200,000 of Earnings & Profits. Gray sells parcels 1 & 2 for its FMV and uses proceeds to compensate employees who are losing their jobs. Gray then liquidates transferring parcel 3 and the stock received to its shareholders. What are the tax consequences of the reorganization to all parties (the acquiring corporation, the target corporation and the shareholders of Gray Corporation)? Acquiring Corp Target Comp Shareholders Stock Land 1 Basis Land 2 Basis Stock FMV Basis E&P Liability New Old 250K 350K 200K 650K(S) 400(L) 450K(S) 650K 350K SSOK $100K 450K SOOK 175K Realize Gain Realize Gain Shareholders Realized Gain Recognize Gain Recognize Gain Shareholders Recognize Gain Basis Basis Basis Character of Gain to Target Character of Gain To Shareholder Complete this question by entering your answers in the tabs below. General Calculation Journal Prepare the appropriate journal entries related to the investment during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (.e., 10,000,000 should be entered as 10).) No Transaction General Journal Debit Credit 1 Investment in equity affiliate 79 Cash 79 1 2 2 12 Investment in equity affiliate Investment revenue 12 3 3 3 2,000,000 Cash Investment in equity affiliate 2 4 4 1,000,000 Investment revenue Investment in equity affiliate 1.000.000 5 5 5 No journal entry required the work you have completed so far. It does not indicate completion. Return to question 1 Fizer Pharmaceutical paid $79 million on January 2, 2021, for 2 million shares of Carne Cosmetics common stock. The investment represents a 20% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations, Fizer received dividends of $4 per share on December 21, 2021, and Carne reported net income of $60 million for the year ended December 31, 2021. The fair value of Carne's common stock at December 31, 2021, was $29.50 per share. 5 points . The book value of Carne's net assets was $200 million The fair value of Carne's depreciable assets exceeded their book value by $45 million. These assets had an average remaining The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill Required: Complete the table below and prepare the appropriate journal entries related to the investment during 2021 Answer is not complete. Complete this question by entering your answers in the tabs below. Calculation General Journal Complete the table below. (Enter your answers in millions, (le, 10,000,000 should be entered as 10)). (5 in millions) Investee Net Ownership Net Assets Assets Interest Purchased Difference Purchase Price $ 79 Fair Value Carne's assets 245 49 30 Book Value Carne's assets 200 20 % 40$ 9 Attributable to: Goodwill Undervaluation of assets Depreciation adjustment: Years Adjustment C Prev 1 of 1 : Next TV Pane Adobe 6. Purple Corporation is acquiring Gray Corporation in a transaction that qualities as a $368 reorganization by exchanging $650,000 of stock and three parcels ((Parcel 1 FMV $350,000 - Basis $50,000); (Parcel 2 FMV $250,000 - Basis $100,000); (Parcel 3 FMV $400,000 - Basis $275,000 for all of Gray's assets (Stock-$450,000 and land (FMV of $500,000 and basis of $350,000) and liabilities of $175,000. Gray also has 200,000 of Earnings & Profits. Gray sells parcels 1 & 2 for its FMV and uses proceeds to compensate employees who are losing their jobs. Gray then liquidates transferring parcel 3 and the stock received to its shareholders. What are the tax consequences of the reorganization to all parties (the acquiring corporation, the target corporation and the shareholders of Gray Corporation)? Acquiring Corp Target Comp Shareholders Stock Land 1 Basis Land 2 Basis Stock FMV Basis E&P Liability New Old 250K 350K 200K 650K(S) 400(L) 450K(S) 650K 350K SSOK $100K 450K SOOK 175K Realize Gain Realize Gain Shareholders Realized Gain Recognize Gain Recognize Gain Shareholders Recognize Gain Basis Basis Basis Character of Gain to Target Character of Gain To Shareholder Complete this question by entering your answers in the tabs below. General Calculation Journal Prepare the appropriate journal entries related to the investment during 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions, (.e., 10,000,000 should be entered as 10).) No Transaction General Journal Debit Credit 1 Investment in equity affiliate 79 Cash 79 1 2 2 12 Investment in equity affiliate Investment revenue 12 3 3 3 2,000,000 Cash Investment in equity affiliate 2 4 4 1,000,000 Investment revenue Investment in equity affiliate 1.000.000 5 5 5 No journal entry required the work you have completed so far. It does not indicate completion. Return to question 1 Fizer Pharmaceutical paid $79 million on January 2, 2021, for 2 million shares of Carne Cosmetics common stock. The investment represents a 20% interest in the net assets of Carne and gave Fizer the ability to exercise significant influence over Carne's operations, Fizer received dividends of $4 per share on December 21, 2021, and Carne reported net income of $60 million for the year ended December 31, 2021. The fair value of Carne's common stock at December 31, 2021, was $29.50 per share. 5 points . The book value of Carne's net assets was $200 million The fair value of Carne's depreciable assets exceeded their book value by $45 million. These assets had an average remaining The remainder of the excess of the cost of the investment over the book value of net assets purchased was attributable to goodwill Required: Complete the table below and prepare the appropriate journal entries related to the investment during 2021 Answer is not complete. Complete this question by entering your answers in the tabs below. Calculation General Journal Complete the table below. (Enter your answers in millions, (le, 10,000,000 should be entered as 10)). (5 in millions) Investee Net Ownership Net Assets Assets Interest Purchased Difference Purchase Price $ 79 Fair Value Carne's assets 245 49 30 Book Value Carne's assets 200 20 % 40$ 9 Attributable to: Goodwill Undervaluation of assets Depreciation adjustment: Years Adjustment C Prev 1 of 1 : Next TV