Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer)

Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer)

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter22: S Corporations

Section: Chapter Questions

Problem 2DQ

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Prosperity Company holds 40% of the voting rights of MNO Co. The remaining shares was held by thousands of shareholders, each hold less than 1% of the voting rights. None of the shareholders has contractual arrangement to consult any of the others or make collective decisions. Which of the following is true regarding the above situation? (Select the best answer) Group of answer choices A.Prosperity does not power over MNO because it holds only protective right. B.Prosperity has power over MNO Co. because Prosperity owns the highest percentage of shares. C.The 40% interest above is presumed to have a de-facto control over MNO Co. because of the relative dispersion of other shares. D.Prosperity does not have power over MNO Co. because its holding is not sufficient rights to give power.
PT A owns 40% ordinary shares of PT B and is exposed to variable returns from its involvement in PT B. The remaining 60% of PT B’s shares are owned by hundreds of unrelated shareholders and none own more than 5% individually. There are no arrangements for shareholders to consult with one another and experience shows that only a few shareholders exercised their voting rights at all. The relevant activities of PT B are directed by the voting rights granted through the common shares. Required: 1. In the above situation, does PT A control PT B? Please explain and give reasons. 2. Would your answer be the same if the remaining 60% of PT B’s shares are owned by 2 investors each 27% and 3 other investors each 2%? Please explain.
Rose plc has two shareholders: · Investor A plc owns 60% of Rose plc’s ordinary shares and voting rights; · Investor B plc owns the remaining 40%. Rose plc’s articles of association stipulate that at least 80% of the voting rights are required to make decisions about Rose’s relevant activities. Rose plc does not depend on its shareholders for settling its liabilities and no shareholder has contractual rights or obligations to the individual assets nor liabilities of Rose plc. How should the investment in Rose plc be consolidated in Investor A plc’s group financial statements according to IFRS? a. As a subsidiary b. As an associate c. As a joint venture d. As a joint operation e. As a liability
P Ltd owns 55% of the shares of S Ltd. Each share entitles the holder to one vote at the AGM.The decisions made at the AGM direct the relevant activities of S Ltd.Identify the correct statement(s) regarding control.(i) P Ltd holds the majority of the voting rights at the AGM.(ii) P ltd has the ability to use its majority voting rights at the AGM to affect its returns.(iii) P Ltd is not exposed to variable returns from S Ltd through dividends and the value of investment in S Ltd.(iv) P Ltd has control over S Ltd and S Ltd is a subsidiary of P Ltd.Select one:a.(i), (ii) and (iii)b.(i) and (iv)c.(i), (iii) and (iv)d.(i), (ii) and (iv)
Which of the following situations are unlikely to represent control over an investee? A. Owning 51%, but the constitution requires that decisions need the unanimous consentof shareholders B. Having currently exercisable options which would take the shareholding in theinvestee to 55% C. Owning 40% of the shares but having majority of voting rights within the investee D. Owning 55% and being able to elect 4 of the 7 directors
Entity A owns 25% of the voting rights in Entity B. However, Entity A has no representation on the board of directors of Entity B. Which of the following statements is correct? * Entity A cannot be presumed to have significant influence over Entity B because Entity A does not have board representation. Entity A is presumed to have signification influence over Entity B because it holds 25% or more of the voting rights in Entity B. Entity A is presumed to have signification influence over Entity B because it holds 20% or more of the voting rights in Entity B. Representation on an investee's board of directors is never considered when determining the existence of significant influence.
When an investor is deemed to have control" over an investee, GAAP requires presentation of consolidated financial statements. Which of the following would not be considered an indicator of control?\\nSelect one:\\nA. The investor owns 40% of the investee's stock and the rest is owned by the investee's founder.\\nB. The investor has majority interest in the investee.\\nC. Instead of owning stock, a company licenses technology to another company in an agreement allowing the licensor to appoint a majority of the licensee's board of directors.\\nD. The investor owns 40% of the Investee's stock and the rest is owned by a large number of small investors.
The shareholders of Endicott Johnson who had dissented from a proposed merger of Endicott with McDonough Corporation brought a proceeding to fix the fair value of their stock. At issue was the proper weight to be given to the market price of the stock in fixing its fair value. The shareholders argued that the market value should not be considered because McDonough controlled 70 percent of Endicott’s stock and the stock had been delisted from the New York Stock Exchange. Are the shareholders correct?
The shareholders of Endicott Johnson who had dissented from a proposed merger of Endicott with McDonough Corporation brought a proceeding to fix the fair value of their stock. At issue was the proper weight to be given to the market price of the stock in fixing its fair value. The shareholders argued that the market value should not be considered because McDonough controlled 70 percent of Endicott’s stock and the stock had been delisted from the New York Stock Exchange. Are the shareholders correct? Explain.
Bob Smith, The accountant of ABC Ltd. has been tasked with redeeming part of the shares outstanding for his corporation. Bob is unsure how he should charge the cost of the redemption to shareholder's equity accounts. Required:Explain to Bob how the cost should be charged to shareholder’s equity accounts. Please provide specific responses for the following circumstances:1) When the cost is lower than the average price per share.2) When the cost is higher than the average price per share.
P Ltd owns 45% of the shares of S Ltd. P Ltd can appoint or remove four of the six directors on the board of S Ltd. Each director is entitled to one vote at the directors’ meeting. The decisions made at the directors’ meetings direct the relevant activities of S Ltd. Identify the correct options that reflect the control that P Ltd has in S Ltd. (i) P Ltd currently holds the majority of the voting rights (4/6 =66,6%) at the directors’ meeting.(ii)The voting rights that P ltd has give the current ability to use its majority vote at the directors’ meeting to direct the relevant activities of S Ltd.(iii) P Ltd is exposed to variable returns from S Ltd through dividends and the value of its investment in S Ltd. (iv) P Ltd has the ability to use its majority voting rights (power) at the directors’ meeting to affect its returns (through dividend policies, operating decisions, etc.). (v)P Ltd has no control over S Ltd because of the 45% shareholding. Select one: a. (i),(iii),(v) b.…
Two enterprises, X and Y, own 100% of the stock of JV, a joint venture. All the equity, $10 million, is equity at risk. X and Y have no involvement in the operation or management of JV, which is the responsibility of a third enterprise, Z. Z provides a $90 million loan to JV in exchange for the right to direct all of JV's activities via a management contract. JV is expected to be profitable without further financing. Is V a VIE and Why?