1. Subsidiary Company reported the following net income and dividends for the years indicated:

Parent acquired 75% of Subsidiary’s common stock on January 1, 20X6. On that date, the fair value of Sub’s net assets was equal to the book value. Parent uses the equity method in accounting for its ownership in Sub and reported a balance of $259,800 in its investment account on December 31, 20X8.

1. What amount did Parent pay to acquire Subsidiary’s shares?

2. What was the fair value of Sub’s net assets on January 1, 20X6?

3. What amount will be assigned to the NCI shareholders in the consolidated balance sheet prepared at December 31, 20X8?

12.Calculating EACYou are evaluating two different silicon wafer milling machines. The Techron I costs $265,000, has a 3-year life, and has pretax operating costs of $41,000 per year. The Techron II costs $330,000, has a 5-year life, and has pretax operating costs 196 of $52,000 per year. For both milling machines, use straight-line depreciation to zero over the project’s life and assume a salvage value of $25,000. If your tax rate is 21 percent and your discount rate is 9 percent, compute the EAC for both machines. Which do you prefer? Why?

13.Cost-Cutting ProposalsStarset Machine Shop is considering a 4-year project to improve its production efficiency. Buying a new machine press for $670,000 is estimated to result in $245,000 in annual pretax cost savings. The press falls in the 5-year MACRS class, and it will have a salvage value at the end of the project of $55,000. The press also requires an initial investment in spare parts inventory of $20,000, along with an additional $2,500 in inventory for each succeeding year of the project. If the shop’s tax rate is 23 percent and the discount rate is 8 percent, should the company buy and install the machine press?

Required information

[The following information applies to the questions displayed below.]

The Fields Company has two manufacturing departments, forming and painting. The company uses the weighted-average method of process costing. At the beginning of the month, the forming department has 25,000 units in inventory, 60% complete as to materials and 40% complete as to conversion costs. The beginning inventory cost of $60,100 consisted of $44,800 of direct materials costs and $15,300 of conversion costs.

During the month, the forming department started 300,000 units. At the end of the month, the forming department had 30,000 units in ending inventory, 80% complete as to materials and 30% complete as to conversion. Units completed in the forming department are transferred to the painting department.

Cost information for the forming department is as follows:

Assume that Fields uses the FIFO method of process costing.

1. Calculate the equivalent units of production for the forming department.

2. Calculate the costs per equivalent unit of production for the forming department. (Round your answers to 2 decimal places.)

The following transactions apply to Jova Company for Year 1, the first year of operation: Issued $10,000 of common stock for cash. Recognized $210,000 of service revenue earned on account. Collected $162,000 from accounts receivable. Paid operating expenses of $125,000. Adjusted accounts to recognize uncollectible accounts expense. Jova uses the allowance method of accounting for uncollectible accounts and estimates that uncollectible accounts expense will be 1 percent of sales on account. Prepare the income statement, statement of changes in stockholders’ equity, balance sheet, and statement of cash flows for Year 1.

a._____ T or F  Certificates of deposit,commercial paper and U.S. Treasury Bills with original maturity of 3 months or less are examples of highly liquid investments and are classified as cash equivalents. (if false, identify and correct error)

b. _____ T or F  Depreciation expense reduces operating income in the Income Statement, but does not require the use of cash. It is reported in the Statement of Cash Flow, within the Financing Activities section, as a separately stated item: addition to net income (if false, identify and correct error)

Carreker, Inc., has a number of divisions, including the Alamosa Division, producer of surgical blades, and the Tavaris Division, a manufacturer of medical instruments. Alamosa Division produces a 2.6 cm steel blade that can be used by Tavaris Division in the production of scalpels. The market price of the blade is $21. Cost information for the blade is:

Variable product cost $ 9.70

Fixed cost 5.50

Total product cost $15.20

Tavaris needs 15,000 units of the 2.6 cm blade per year. Alamosa Division is at full capacity (90,000 units of the blade).

1. If Carreker, Inc., has a transfer pricing policy that requires transfer at full product cost, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
2. If Carreker, Inc., has a transfer pricing policy that requires transfer at full cost plus 25 percent, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
3. If Carreker, Inc., has a transfer pricing policy that requires transfer at variable product cost plus a fixed fee of $2.00 per unit, what would the transfer price be? Do you suppose that Alamosa and Tavaris divisions would choose to transfer at that price?
4. What if Alamosa Division plans to produce and sell only 65,000 units of the 2.6 cm blade next year? The Carreker, Inc., policy is that all transfers be at full cost. Which division sets the minimum transfer price, and what is it? Which division sets the maximum transfer price, and what is it? Do you suppose that Alamosa and Tavaris divisions would choose to transfer?

You are managing a portfolio and considering whether to adopt either one of two trading strategies. In the value strategy, you would hold a portfolio consisting of the 300 stocks with the highest book-to-market ratio. In the seasonality strategy, you would hold a portfolio consisting of the 300 stocks with the highest returns in the upcoming calendar month of the previous year. In both cases, you would rebalance portfolios at the end of each month. Suppose you forecast that both strategies would earn the same average monthly return (before trading costs) and same monthly standard deviation. Which strategy would you follow and why?

Heidi is 17 years old and a dependent of her parents. She receives $8,700 of wages from a part-time job and $9,200 of taxable interest from bonds she inherited.

FIND OUT

-taxable income and

-tax.

STANDARD DEDUCTION

Filing Status

Married individuals filing joint returns and surviving spouses

$24,400

Heads of households

$18,350

Unmarried individuals (other than surviving spouses and heads of households)

$12,200

Married individuals filing separate returns

$12,200

Additional standard deduction for the aged and the blind; Individual who is married and surviving spouses

$1,300*

Additional standard deduction for the aged and the blind; Individual who is unmarried and not a surviving spouse

$1,650*

Taxpayer claimed as dependent on another taxpayer’s return: Greater of (1) earned income plus $350 or (2) $1,100.

* These amounts are $2,600 and $3,300, respectively, for a taxpayer who is both aged and blind.

Child's tax rate brackets:

10% tax rate: Portion of taxable income not over ETI plus $2,600

24% tax rate: Portion of taxable income over ETI plus $2,600 but not over ETI plus $9,300

35% tax rate: Portion of taxable come over ETI plus $9,300 but not over ETI plus $12,750

37% tax rate: Portion of taxable income over ETI plus $12,750

Single

If taxable income is:

The tax is:

Not over $9,700. . . . . . . . . . . . . . . . . . .

10% of taxable income.

Over $9,700 but not over $39,475. . . .

$970.00 + 12% of the excess over $9,700.

Over $39,475 but not over $84,200. . .

$4,543.00 + 22% of the excess over $39,475.

Over $84,200 but not over $160,725. .

$14,382.50 + 24% of the excess over $84,200.

Over $160,725 but not over $204,100

$32,748.50 + 32% of the excess over $160,725.

Over $204,100 but not over $510,300

$46,628.50 + 35% of the excess over $204,100.

Over $510,300. . . . . . . . . . . . . . . . . .

$153,798.50 + 37% of the excess over $510,300.

cumulative preferred stock mean

Suppose that you are a portfolio manager for an actively managed portfolio. Your mandate is to beat a benchmark index by holding a portfolio of some subset of stocks in the index. You cannot short sell stocks or trade derivatives. You develop a quantitative model to calculate a “price target” for every stock in the benchmark index. Explain how you could use these price targets to manage your portfolio.

Which of the following approaches is NOT an avenue for changing the position of Arm & Hammer Baking Soda in the minds of consumers in order to extend the product life cycle and increase sales?

Increasing trade promotions

Adding new distribution outlets for the product

Enlarging the target market

Identifying jobs other than baking

Identifying new usage situations

Walsh Company manufactures and sells one product. The following information pertains to each of the company’s first two years of operations:

Variable costs per unit:

Manufacturing:

Direct materials $ 29

Direct labor $ 11

Variable manufacturing overhead $ 3

Variable selling and administrative $ 2

Fixed costs per year:

Fixed manufacturing overhead $ 400,000

Fixed selling and administrative expenses $ 90,000

During its first year of operations, Walsh produced 50,000 units and sold 40,000 units. During its second year of operations, it produced 40,000 units and sold 50,000 units. The selling price of the company’s product is $82 per unit.

Required:

1. Assume the company uses variable costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

2. Assume the company uses absorption costing: a. Compute the unit product cost for Year 1 and Year 2.

b. Prepare an income statement for Year 1 and Year 2.

3. Reconcile the difference between variable costing and absorption costing net operating income in Year 1.

INDIRECT METHOD - STATEMENT CASH FLOW

Using information below, Create a Statement of Cashflow (INDIRECT METHOD)

**Note: create the statement for the year of 2018 only.

Net Income from Income statement: $105,000.00

the Retained Earnings was $80,000.00

Small Appliances Division Cleaning Products Division

Sales $34,670,000 $31,320,000

Operating income 2,773,600 1,252,800

Operating assets, January 1 6,394,000 5,600,000

Operating assets, December 31 7,474,000 6,000,000

Forchen, Inc., requires an 8 percent minimum rate of return.

For the Small Appliances Division, calculate:

a. Average operating assets

b. Margin

c. Turnover

d. Return on investment (ROI)

2. For the Cleaning Products Division, calculate:

a. Average operating assets

b. Margin

c. Turnover

d. Return on investment (ROI)

3. What if the minimum required rate of return was 9 percent? How would that affect the residual income of the two divisions?