help in homework

New User?

Fill This Form To Receive Instant Help

Help in Homework
trustpilot ratings
google ratings


Homework answers / question archive / 1 Canary Corporation, an accrual method C corporation, uses the calendar year for tax purposes

1 Canary Corporation, an accrual method C corporation, uses the calendar year for tax purposes

Accounting

1 Canary Corporation, an accrual method C corporation, uses the calendar year for tax purposes. Leticia, a cash method taxpayer, is both a shareholder of Canary and the corporation's CFO. On December 31, 2020, Canary has accrued a $75,000 bonus to Leticia. Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 7, 2021. In which year (2020 or 2021) is Canary allowed to deduct the bonus? 

2 

The Balance sheet for a company shows a book value of stockholders equity (book value per share x total shares outstanding) of $23,500,000. Furthermore, the firm's income statement for the year just ended has net income of $500,000, which is $0.25 per share of common stock outstanding. the P/E ratio for firm similar to this company is 20.
Q1. What price would you expect this company share to sell for
Q2. what is the book value per share for this company

pur-new-sol

Purchase A New Answer

Custom new solution created by our subject matter experts

GET A QUOTE

Answer Preview

1 Answer: 2021

Under § 267(a)(2), For purposes of this limitation, a more-than-50% shareholder of the corporation is a related party

Leticia is a cash method related party who does not include the bonus in her income until its receipt in 2021; thus, Canary’s deduction for the bonus is deferred until 2021 

2 

Solution:

Answer 1. As P/E Ratio for similar company given as 20. So P/E Ratio of this company is same as similar company that is 20.

             P/E Ratio = Market price per share / Earning per share

                 20 = Market price per share / $0.25

                 Market price per share = 20 * $ 0.25

                 Market price per share = $ 5

So the expected market price is $ 5.

Answer 2. Total shares outstanding = Total earnings / Earning per share

                                                 = $ 500,000 / $ 0.25

              Total shares outstanding = $ 2,000,000

Book value per share = Book value of stockholders equity / Total shares outstanding

                               = $ 23,500,000 / $ 2,000,000

Book value per share = $ 11.75

Sitejabber (5.0)

BBC (5.0)

Trustpilot (4.9)

Google (5.0)