I would like some clarity regarding Sec 302(b)(2) Here is my homework problem: ...
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Accounting
I would like some clarity regarding Sec 302(b)(2)
Here is my homework problem:
X corporation has 100 shares of common stock outstanding and 200 shares of nonvoting preferred stock outstanding. Alice owns 80 common shares and 100 preferred shares. An individual unrelated to Alice owns the remaining shares. Assume Section 306 is not applicable.
(a) True or false: If X corporation redeems 75 of Alices preferred shares, then the requirements of Section 302(b)(2) will be met. Answer = false
(b) True or false: If, in addition to (a), X corporation also redeems 60 of Alices common shares, then the requirements of Section 302(b)(2) will be met resulting in the redemption being treated as a distribution in payment of both the preferred and common stock. Answer = false
(c) True or false: If, in addition to (a), X corporation also redeems 70 of Alices common shares, then the requirements of Section 302(b)(2) will be met resulting in the redemption being treated as a distribution in payment of both the preferred and common stock. Answer = true
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