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Ambrose purchased 400 shares of $100 par value original issue common stock from Minor Corporation for...

Ambrose purchased 400 shares of $100 par value original issue common stock from Minor Corporation for $25 a share. Ambrose subsequently sold 200 of the shares to Harris at $25 a share. Harris did not have knowledge or notice that Ambrose had not paid par. Ambrose also sold 100 shares of this stock to Gable for $25 a share. At the time of this sale, Gable knew that Ambrose had not paid par for the stock. Minor Corporation became insolvent and the creditors sought to hold all the above parties liable for the $75 unpaid on each of the 400 shares. Under these circumstances

a. The creditors can hold Ambrose liable for $30,000.

b. If $25 a share was a fair value for the stock at the time of issuance, Ambrose will have no liability to the creditors.

c. Since Harris acquired the shares by purchase, he is not liable to the creditors, and his lack of knowledge or notice that Ambrose paid less than par is immaterial.

d. Since Gable acquired the shares by purchase, he is not liable to the creditors, and the fact that he knew Ambrose paid less than par is immaterial.

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Answer #1

Option ,a. The creditors can hold Ambrose liable for $30,000.

Reason : The creditors can sue the shareholders for the difference between the par value and the paid value when the company becomes insolvent irrespective of the shares being sold off.

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