ACCT618 Colorado Technical Mason Machining Business Expansion Strategies Paper 1500-2000 words, not including title and references JIM is acquiring all of

ACCT618 Colorado Technical Mason Machining Business Expansion Strategies Paper 1500-2000 words, not including title and references

JIM is acquiring all of the assets of Mason Machining, Inc. in a merger transaction. Mason transfers assets having a FMV of $1,775,000 and an adjusted basis of $995,000 and $200,000 in liabilities to JIM in exchange for $750,000 in cash and $800,000 of JIM’s common stock.

Click here to view Mason’s Acquisition Data. (attached below)

Explain what type of merger this is. JIM distributes its stock and cash to Mason in exchange for all of its assets.
Calculate Mason’s gain on this transaction.
How much of this gain will Mason recognize?
How must tax liability will Mason incur from this transfer?

Mason distributes the JIM stock and cash to its shareholders for all of their shares of Mason’s stock. Shareholders’ basis in this stock is $600,000.

Calculate how much gain the Mason’s shareholders will realize and recognize on this transfer.
How must tax liability will Mason’s shareholders incur from this transfer?
Explain the tax implications for JIM. Mason Machining, Inc.
Acquisition Data
Actual
Actual
2005
2006
Balance Sheet
Difference
$200.000
1.575.000
$35.000
Other Assets
$165.000
1.500.000
Total Assets
$1.665.000
$1.775.000
$110.000
$165.000
$225.000
$60.000
Cash
Liabilities
Common Stock, $1 par
Retained Earnings
Total Liabilities & Equity
75.000
1.000.000
500.000
$1.665.000
1.000.000
550.000
$1.775.000
0
50.000
$50.000
$5.250.000
2.500.000
$2.750.000
$6.000.000
2.800.000
$3.200.000
$750.000
$300.000
$450.000
900.000
500.000
$1.350.000
950.000
500.000
$1.750.000
$50.000
$0
$400.000
$5.250.000
2.500.000
2.750.000
900.000
$1.850.000
$6.000.000
2.800.000
3.200.000
950.000
$2.250.000
$750.000
300.000
450.000
$50.000
$400.000
$28.000
3.000
240.000
$271.000
1.200.000
$1.471.000
$40.000
5.000
336.500
$381.500
1.080.000
$1.461.500
$5.000
$8.000
$1.200.000
$1.200.000
Income
Sales
Variable Expenses
Contribution Margin
Less Fixed Expenses:
Costs
Depreciation
Net Operating Income
Cash Flow
Sales
Less Variable Expenses
Contribution Margin
Less Costs
Net Annual Cash Inflow
Assets
Current Assets
Cash
Accounts Receivable
Inventory
Total Current Assets
Plant Equipment
Total Assets
Current Liabilities
Accounts Payable
Equities
Owners’ Equity
$58.000
$76.000
8.000
9.000
468.400
380.000
$534.400
$383.500
960.000
960.000
$1.494.400 $1.343.500
$6.000
$5.000
$1.200.000 $1.200.000
Retained Earnings
Total Owners’ Equity
Total Liabilities
266.000
1.466.000
$1.471.000
253.500
1.453.500
$1.461.500
288.400
138.500
1.488.400
1.338.500
$1.494.400 $1.343.500

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