Cullumber Inc. was a small company started by four entrepreneurs a few years ago. They each initially invested $300,000 and sold $1.7 million in preferred shares to a wealthy private investor. The company did not earn much profit from its operations but was able to pay the promised annual dividend of $145,000 on the preferred shares. The company did successfully develop several patents, some of which it sold and some it still holds. The four founding shareholders are planning to sell the remaining patents and all other assets and wind up the company to allow them to move on to other ventures. A summary of the company's statement of financial position is as follows: CULLUMBER INC. Statement of Financial Position as at April 30, 2024 Total assets Total liabilities Preferred shares Common shares Retained earnings Total liabilities and equity (a) Your answer is partially correct. $3,205,000 75,000 1,700,000 1,200,000 230,000 $3,205,000 How much will each group of shareholders receive on the windup if Cullumber is able to sell its assets for: i. $3,205,000? ii. $6,115,000? $2,883,000? If assets sold for Preferred shareholders' entitlement Common shareholders' entitlement VA $ (i) $3,205,000 1,700,000 1,505,000 LA LA (ii) $6,115,000 1,700,000 4,415,000 LA $ +A (iii) $2,883,000 1,70 1,183
Cullumber Inc. was a small company started by four entrepreneurs a few years ago. They each initially invested $300,000 and sold $1.7 million in preferred shares to a wealthy private investor. The company did not earn much profit from its operations but was able to pay the promised annual dividend of $145,000 on the preferred shares. The company did successfully develop several patents, some of which it sold and some it still holds. The four founding shareholders are planning to sell the remaining patents and all other assets and wind up the company to allow them to move on to other ventures. A summary of the company's statement of financial position is as follows: CULLUMBER INC. Statement of Financial Position as at April 30, 2024 Total assets Total liabilities Preferred shares Common shares Retained earnings Total liabilities and equity (a) Your answer is partially correct. $3,205,000 75,000 1,700,000 1,200,000 230,000 $3,205,000 How much will each group of shareholders receive on the windup if Cullumber is able to sell its assets for: i. $3,205,000? ii. $6,115,000? $2,883,000? If assets sold for Preferred shareholders' entitlement Common shareholders' entitlement VA $ (i) $3,205,000 1,700,000 1,505,000 LA LA (ii) $6,115,000 1,700,000 4,415,000 LA $ +A (iii) $2,883,000 1,70 1,183
Chapter16: Tax Research
Section: Chapter Questions
Problem 71EDC
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Transcribed Image Text:Cullumber Inc. was a small company started by four entrepreneurs a few years ago. They each initially invested $300,000 and sold
$1.7 million in preferred shares to a wealthy private investor. The company did not earn much profit from its operations but was able
to pay the promised annual dividend of $145,000 on the preferred shares. The company did successfully develop several patents,
some of which it sold and some it still holds. The four founding shareholders are planning to sell the remaining patents and all other
assets and wind up the company to allow them to move on to other ventures. A summary of the company's statement of financial
position is as follows:
CULLUMBER INC.
Statement of Financial Position
as at April 30, 2024
Total assets
Total liabilities
Preferred shares
Common shares
Retained earnings
Total liabilities and equity
(a)
i.
$3,205,000?
ii. $6,115,000?
iii.
$2,883,000?
$3,205,000
75,000
1,700,000
Your answer is partially correct.
How much will each group of shareholders receive on the windup if Cullumber is able to sell its assets for:
If assets sold for
1,200,000
230,000
$3,205,000
Preferred shareholders' entitlement
Common shareholders' entitlement
19
$
(i)
$3,205,000
1,700,000
1,505,000
LA
tA
(ii)
$6,115,000
1,700,000
4,415,000
+A
VA
(iii)
$2,883,000
1,70
1,183
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