1) Sanfran, Inc. decided to split off its gift retail subsidiary named J. Wall (JW). Assume Sanfran holds 1.5 million shares of JW at a net book value $72 million and the current market value of JW shares is $57.60 per share. Assume a 1 to 1 share transaction.

a.What would be the effect on the balance sheet if shares are distributed pro rata?

b.What would be the effect on the balance sheet if shares are distributed non pro rata?

2) Manfred Company retired $500,000 of 5% bonds payable at 96 on June 30, 2017, two years before the bonds matured. The bond book value on June 30, 2017 is $475,000, and bond interest is paid up to the date of retirement.

What is the gain/loss on the retirement of these bonds?