InventBear Inc. is planning to establish a subsidiary in Australia to produce and sell gaming products locally. The project will end in three years and the subsidiary will be sold to an Australian firm for A$5 million at the end of the project. The salvage value is net of tax and will not be subject to withholding tax. InventBear estimates that, after paying for the income tax, the Australian subsidiary can remit A$5,450,000 to the parent every year for the next three years, starting at the end of the first year. The Australian subsidiary will require an initial investment of 7 million U.S. dollars (US$). The Australian government will impose a 25% withholding tax on the remitted funds. The subsidiary will remit all net cash flows to its parent at the end of each year. The company forecasts the exchange rate for the next three years using the current spot rate at US$0.91/A$. The parent’s required rate of return for the Australian subsidiary is 16%. If the U.S. government does not tax the A$ income, how much U.S. dollars will InventBear Inc. receive from the Australian subsidiary at the end of the third year?

a. US$4,268,859

b. US$3,719,625

c. US$8,269,625

d. US$8,715,980

Investment Bankers often become involved with the mergers and acquisitions of firms.

So, why might a firm need an investment banking firm to both initiate and complete either the merger or acquisition of a firm...and, tell us what the difference is between a merger and an acquisition.

In addition, as CEO (chief investment officer) of the firm, you are to determine the best time to commence the merger/acquisition and the terms of the purchase/take-over. What type of questions might you have, and, what types of market (stock/bond market levels of rates and activity) conditions might favor various methods for said merger/acquisition. Lastly, how might you go about selecting an investment banking firm?

The psychiatric nurse is initiating an interview with Mr. Johnson. He is a 33-year-old male patient admitted to the Behavioral Center with a diagnosis of schizophrenia. The nurse begins the interaction by saying, “What shall we talk about today?” (Learning Objective: 2)

a. Explain why this is an appropriate opening statement to initialize a clinical interview session.

b. Why should the nurse use simple, concrete, and direct messages with the patient?

Bust-A-Knee Inc. (Bust-A-Knee) is a medical device company that specializes in developing knee replacement hardware. In 2020, Bust-A-Knee acquired 100 percent equity ownership of MD International (MD) for a purchase price of $15 million. MD is a pharmaceutical company that is developing two drugs: (1) a drug to cure cancer, Drug X, and (2) a pain medication, OuchX. Bust-A-Knee acquired the entity to expand into a new sector within the medical field.

Bust-A-Knee concluded the acquisition of MD was a business combination. In purchase accounting, Bust-A-Knee recognized intangible assets for the in-process research and development (IPR&D) related to the ongoing development of Drug X and OuchX, among other acquired intangible assets. The IPR&D of Drug X and OuchX had acquisition-date fair values of $4 million and $3 million, respectively.

During 2021, Bust-A-Knee determined its operations could not support the continued development of Drug X because significant efforts were being put forth in the development of OuchX. Since the date of acquisition, Bust-A-Knee had not invested any additional funding in the development of Drug X. Bust-A-Knee determined that there was no change in the carrying amount recorded on the date of acquisition.

Rather than abandon the development project, Bust-A-Knee entered into an agreement with Pharmers Company (Pharmers) to transfer its ownership interests in (and control of) the IPR&D for Drug X. Pharmers, the market’s largest pharmaceutical company, will use Drug X’s IPR&D to continue its development, and obtain FDA approval to sell the drug on the open market. Selling IPR&D is not part of Bust-A-Knee’s ordinary activities and therefore Pharmers is not a customer of Bust-A-Knee (as defined by ASC 606).

In return, Pharmers will pay Bust-A-Knee (1) a nonrefundable fixed fee of $2 million at contract execution; (2) a contingent future payment of $500,000, when Drug X is FDA approved; and (3) a 10 percent royalty fee based on the annual sales earned by Pharmers for the sale of Drug X in each of the subsequent five years following FDA approval.

On the date of transfer, Bust-A-Knee estimates that the total consideration (nonrefundable fixed fee and contingent future fees) will be between $5 million and $6.5 million and that the weighted average expected amount of consideration Bust-A-Knee expects to be entitled to (at an 80 percent probability) is $5.5 million. Under the agreement, Pharmers paid $2 million when it obtained control of the IPR&D of Drug X and will pay the additional amounts if and when the associated contingencies related to such amounts are resolved.

Required:

• On the date of transfer to Pharmers, how should Bust-A-Knee record the transaction?

Bust-A-Knee Inc. (Bust-A-Knee) is a medical device company that specializes in developing knee replacement hardware. In 2020, Bust-A-Knee acquired 100 percent equity ownership of MD International (MD) for a purchase price of $15 million. MD is a pharmaceutical company that is developing two drugs: (1) a drug to cure cancer, Drug X, and (2) a pain medication, OuchX. Bust-A-Knee acquired the entity to expand into a new sector within the medical field. Bust-A-Knee concluded the acquisition of MD was a business combination. In purchase accounting, Bust-A-Knee recognized intangible assets for the in-process research and development (IPR&D) related to the ongoing development of Drug X and OuchX, among other acquired intangible assets. The IPR&D of Drug X and OuchX had acquisition-date fair values of $4 million and $3 million, respectively. During 2021, Bust-A-Knee determined its operations could not support the continued development of Drug X because significant efforts were being put forth in the development of OuchX. Since the date of acquisition, Bust-A-Knee had not invested any additional funding in the development of Drug X. Bust-A-Knee determined that there was no change in the carrying amount recorded on the date of acquisition. Rather than abandon the development project, Bust-A-Knee entered into an agreement with Pharmers Company (Pharmers) to transfer its ownership interests in (and control of) the IPR&D for Drug X. Pharmers, the market’s largest pharmaceutical company, will use Drug X’s IPR&D to continue its development, and obtain FDA approval to sell the drug on the open market. Selling IPR&D is not part of Bust-A-Knee’s ordinary activities and therefore Pharmers is not a customer of Bust-A-Knee (as defined by ASC 606). In return, Pharmers will pay Bust-A-Knee (1) a nonrefundable fixed fee of $2 million at contract execution; (2) a contingent future payment of $500,000, when Drug X is FDA approved; and (3) a 10 percent royalty fee based on the annual sales earned by Pharmers for the sale of Drug X in each of the subsequent five years following FDA approval. On the date of transfer, Bust-A-Knee estimates that the total consideration (nonrefundable fixed fee and contingent future fees) will be between $5 million and $6.5 million and that the weighted average expected amount of consideration Bust-A-Knee expects to be entitled to (at an 80 percent probability) is $5.5 million. Under the agreement, Pharmers paid $2 million when it obtained control of the IPR&D of Drug X and will pay the additional amounts if and when the associated contingencies related to such amounts are resolved.

Required: • On the date of transfer to Pharmers, how should Bust-A-Knee record the transaction?

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on March 1, 2016. It acquired financing from the issuance of common stock for $40,000,000 and issuance of 4% bonds that mature in 2026 for $30,000,000. The income statements and balance sheets for the first two years are provided in a separate Excel spreadsheet. All amounts are in thousands.

Required:

The Chief Executive Officer (CEO) is interested in increasing sales and decreasing expenses. You have been requested to prepare a report that provides analysis of the financial statements and recommendations to improve the financial performance of the company. Your report should include the following items:

Calculate the following ratios and provide an analysis of the company based on the ratios: (Show Work)

Days Sales Outstanding=

Profit Margin=

Asset Turnover=

Return on Assets=

Financial Leverage=

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on March 1, 2016. It acquired financing from the issuance of common stock for $40,000,000 and issuance of 4% bonds that mature in 2026 for $30,000,000. The income statements and balance sheets for the first two years are provided in a separate Excel spreadsheet. All amounts are in thousands.

Required:

The Chief Executive Officer (CEO) is interested in increasing sales and decreasing expenses. You have been requested to prepare a report that provides analysis of the financial statements and recommendations to improve the financial performance of the company. Your report should include the following items:

Calculate the following ratios and provide an analysis of the company based on the ratios: (Show Work)

Return on Equity=

PPE Turnover=

Total Liabilities to Equity=

Times Interest Earned=

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on March 1, 2016. It acquired financing from the issuance of common stock for $40,000,000 and issuance of 4% bonds that mature in 2026 for $30,000,000. The income statements and balance sheets for the first two years are provided in a separate Excel spreadsheet. All amounts are in thousands.

Required:

The Chief Executive Officer (CEO) is interested in increasing sales and decreasing expenses. You have been requested to prepare a report that provides analysis of the financial statements and recommendations to improve the financial performance of the company. Your report should include the following items:

Calculate the following ratios and provide an analysis of the company based on the ratios: (SHOW ALL WORK)

Financial Leverage

Return on Equity

PPE (property Plant& Equipment) Turnover

Total Liabilities to Equity

Times Interest Earned

Silver Cloud Computing is a company that provides cloud computing services. The company commenced operations on March 1, 2016. It acquired financing from the issuance of common stock for $40,000,000 and issuance of 4% bonds that mature in 2026 for $30,000,000. The income statements and balance sheets for the first two years are provided in a separate Excel spreadsheet. All amounts are in thousands.

Required:

The Chief Executive Officer (CEO) is interested in increasing sales and decreasing expenses. You have been requested to prepare a report that provides analysis of the financial statements and recommendations to improve the financial performance of the company. Your report should include the following items:

Prepare common sized financial statements for both years and provide comments on the differences between the years.Are there any areas of concern?

Calculate the following ratios and provide an analysis of the company based on the ratios:

Days Sales Outstanding

Profit Margin

Asset Turnover

Return on Assets

Financial Leverage

Return on Equity

PPE Turnover

Total Liabilities to Equity

Times Interest Earned