Rantzow-Lear Company buys and sells securities expecting to earn profits on short-term differences in price

E 12-4 Various transactions relating to trading securities

Rantzow-Lear Company buys and sells securities expecting to earn profits on short-term differences in price. The company's fiscal year ends on December 31. The following selected transactions relating to Rantzow-Lear's trading account occurred during December 2011 and the first week of 2012.

Required:
1. Prepare the appropriate journal entry for each transaction.
2. Indicate any amounts that Rantzow-Lear Company would report in its 2011 balance sheet and income statement as a result of this investment.


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In 2008, Adrianna contributed land with a basis of $16,000 and a fair market value of $25,000 to the A&I Partnership in exchange for a 25% interest in capital and profits

In 2008, Adrianna contributed land with a basis of $16,000 and a fair market value of $25,000 to the A&I Partnership in exchange for a 25% interest in capital and profits. In 2011, the partnership distributes this property to Isabel, also a 25% partner, in a no liquidating distribution. The fair market value has increased to $30,000 at the time the property is distributed. Isabel’s and Adrianna’s bases in their partnership interests are each $40,000 at the time of the distribution.

a. How much gain or loss, if any, does Adrianna recognize on the distribution to Isabel? What is Adrianna’s basis in her partnership interest following the distribution?
b. What is Isabel’s basis in the land she received in the distribution?
c. How much gain or loss, if any, does Isabel recognize on the distribution? What is Isabel’s basis in her partnership interest following the distribution?
d. How much gain or loss would Isabel recognize if she later sells the land for its $30,000 fair market value? Is this result equitable?
e. Would your answers to (a) and (b) change if Adrianna originally contributed the property to the partnership in 2000?

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Profits and Losses from Straddles: Julian Herrara, a sophisticated investor who is both willing and able to take risk, has just noticed that Go-West Airlines has become the target of a hostile takeover

Profits and Losses from Straddles:

Julian Herrara, a sophisticated investor who is both willing and able to take risk, has just noticed that Go-West Airlines has become the target of a hostile takeover. Prior to the announcement of the offer to purchase the stock for $72 a share, the stock had been selling for $59. Immediately after the offer the stock rose to $75, a premium over the offer price.

AND SO ON

Construct Herrara’s profit profiles and answer the following questions.
1. What strategy works best if a bidding war erupts?
2. What strategy works best if the hostile takeover is defeated?
3. Which strategy works best if the original offer price becomes the final price?
4. Which of the three positions produces the worst result and under what condition does it occur?
5. If you were Herrara’s financial advisor, which strategy would you advise he establish? Or would you argue that he not speculate on this takeover?

Click here for the solution: Profits and Losses from Straddles: Julian Herrara, a sophisticated investor who is both willing and able to take risk, has just noticed that Go-West Airlines has become the target of a hostile takeover