Assume the following facts: Keystone is defunct, has zero assets, and has two liabilities remaining on its
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Question:
Assume the following facts:
- Keystone is defunct, has zero assets, and has two liabilities remaining on its balance sheet:
- Unsecured pension liability = $5 million
- Secured loan to an owner named Mr. Javlin = $10,000,000
- Assume that Keystone has two owners: Mr. Javlin (67%) and Mr. Linton (33%)
- Assume that during the period 20X2 through 20X8, companies owned by Mr. Javlin were paid $32,000,000 by Keystone. Company names included Sword Ridge, Sword River, Rock River, Rock Rider, Cobra Coal, Rock Walker, Arctic Resources, Cinnamon Resources.
- Assume that during the period 20X2 through 20X8, companies owned by Mr. Linton were paid $16,000,000 by Keystone. Company names included Atlantic Supply, Keystone Land & Coal, First Management, Sundance.
- After one year of litigation discovery, no evidence was provided by Keystone, Javelin, or Linton to substantiate the business purposes for these payments by Keystone.
- Neither Mr. Javlin nor Mr. Linton drew a salary during the period 20X2–20X8.
Graphically present this information. What conclusions can you draw?
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
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