Problem 4 At the beginning of 2012, Ross Technology, Inc. acquired the Valpo Corporation. In addition to cash, receivables, and inventory, the following assets were recorded: Plant and equipment (depreciable assets) $120 million Developed technology (intangible asset) 60 million The plant and equipment is depreciated over an 8-year useful life on a straight-line basis. There is no estimated residual value. The purchased technology is estimated to have a 6-year useful life, no residual value, and is amortized using the straight-line method. At the end of 2014, a change in business climate indicated to management that the operational assets of Valpo might be impaired. The following amounts have been determined: Plant and equipment: Undiscounted sum of future cash flows $65 million Fair value 50 million Developed technology: Undiscounted sum of future cash flows $15 million Fair value 10 million Required:

a) Compute the book value of the plant and equipment and developed technology at the end of 2014.

b) Determine the amount of any impairment loss to be recorded, if any, for the two assets.

The Board of Directors of Potato Pave Inc. (PPI) is considering a $10 million dollar investment in new molecular biology technology that will enable PPI to, if successful, grow and produce potato plants of improved varieties and at a faster rate compared to conventional potato farming technologies. The successful implementation of this new technology is expected to bring in $100 million for PPI, and the likelihood of such success is 25%. There is a 5% chance the technology will ravage PPI’s current potato crop, and result in additional losses of $100 million dollars to PPI. The Board believes that the most likely scenario (with a 70% likelihood) is that the technology will yield just enough value to offset the $10 million expended to invest in the technology. PPI today has $110 million of total assets and $120 million of total liabilities (its liabilities are to a single creditor, Credit Potato). Assume all dollar amounts are present values and impact PPI’s balance sheet.

(a) (10%) What is the expected value of the prospective investment from the perspectives of (i) the corporate enterprise, PPI, and (ii) its single creditor, Credit Potato? Show the process of calculation.

Recently Johnson & Johnson, a big research-based pharmaceutical company, signs a contract with Moderna, a start-up biotech company, and

1. promises to Grant Moderna the exclusive rights to use Johnson & Johnson’s Technology Q for the life of its patent. This license gives Moderna the exclusive right to market, distribute, and manufacture Vaccine Q19 as developed using Technology Q. Johnson & Johnson views the patent as functional intellectual property.

2. Assign two full-time employees to perform research and development work for Moderna in a specially designated Johnson & Johnson lab facility. The primary objective of these service is to get regulatory approval to market and distribute Vaccine Q19 using Technology Q.

Moderna is required to use Johnson & Johnson’s lab to perform the research and development service necessary to develop Vaccine Q19 using Technology Q, because the expertise related to Technology Q is proprietary to Johnson & Johnson and not available elsewhere.

Required Questions

How many performance obligations (s) can you find in the contract?

Explain your reasoning for each performance obligation

Imagine you work for a health care organization and have been asked to develop a proposal on how the organization might adopt a technology trend to improve the quality of the health care delivered to organization members.

Select and research two technology trends. Examples of technology trends:

• Telemedicine
• Optical imagery for diagnosing disease
• Electronic health records
• Telehealth
• Video translation services
• Dictation services (e.g., Dragon NaturallySpeaking)
• Medical equipment
• Health care robots
• Neural engineering
• Intelligent mobile devices
• National health care information network
• A technology trend approved by your faculty

Complete the table below by explaining the trend’s use, the effect of the trend on the health care industry, the benefits of adopting the selected trend, and how the selected trend will improve the quality of health care delivered.

Imagine you work for a health care organization and have been asked to develop a proposal on how the organization might adopt a technology trend to improve the quality of the health care delivered to organization members.

Examples of technology trends:

Telemedicine

Optical imagery for diagnosing disease

Electronic health records

Telehealth

Video translation services

Dictation services (e.g., Dragon NaturallySpeaking)

Medical equipment

Health care robots

Neural engineering

Intelligent mobile devices

National health care information network

A technology trend approved by your faculty

Select and research two technology trends.

Complete the table below by explaining the trend’s use, the effect of the trend on the health care industry, the benefits of adapting the selected trend, and how the selected trend will improve the quality of health care delivered.

Read the following Judgement Case prompt:

Assume that Pfizer, a large research-based pharmaceutical company, enters into a contract with a start-up biotechnology company called HealthPro and promises to: Grant HealthPro the exclusive rights to use Pfizer’s Technology A for the life of its patent. The license gives HealthPro the exclusive right to market, distribute, and manufacture Drug B as developed using Technology A. Assign four full-time equivalent employees to perform research and development services for HealthPro in a specially designated Pfizer lab facility. The primary objective of these services is to receive regulatory approval to market and distribute Drug B using Technology A. HealthPro is required to use Pfizer’s lab to perform the research and development services necessary to develop Drug B using Technology A, because the expertise related to Technology A is proprietary to Pfizer and not available elsewhere.

After reading the above prompt, respond to the following:

Discuss the 2016 financial statement presentation of each of the above events. Do not consider earnings per share disclosures. What parts of this contract are separate performance obligations? Explain your reasoning for each obligation.

On June 1, 2020, BlueSky Company provided services to GreenGrass Company and received a 1-year, 8%, $150,000 note, due May 31, 2021. Interest is payable at maturity. BlueSky records adjusting entries annually at December 31.

a. Compute the total interest on the note. How much interest revenue will be recognized in 2020? In 2021?

b. Record the June 1, 2020, journal entry for BlueSky.

c. Record the December 31, 2020, adjusting journal entry for BlueSky.

d. BlueSky’s 2020 preliminary net income of $100,000 was computed without including any amounts related to the receipt of the note or the 12-31-20 adjusting entry. Determine the correct amount of 2020 net income. Ignore taxes.

e. On BlueSky’s December 31, 2019, balance sheet, retained earnings was reported at $300,000. In 2020, the company paid $40,000 in dividends. What is the December 31, 2020, retained earnings balance?

f. What amount(s) will BlueSky report on the December 31, 2020, balance sheet related to the note? How will these amounts be classified?

e. Record the May 31, 2021, journal entry for BlueSky for the receipt of principal and interest.

Monty Company sponsors a defined benefit pension plan. The corporation’s actuary provides the following information about the plan.

(a) Compute the actual return on the plan assets in 2020.

(b) Compute the amount of the other comprehensive income (G/L) as of December 31, 2020. (Assume the January 1, 2020, balance was zero.) (Enter loss using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

(c) Compute the amount of net gain or loss amortization for 2020 (corridor approach).

(d) Compute pension expense for 2020.

Pacifica Papers Inc. needed to conserve cash, so instead of a cash dividend, the board of directors declared a 10% common share dividend on June 30, 2020, distributable on July 15, 2020. Because performance during 2020 was better than expected, the company’s board of directors declared a $1.20 per share cash dividend on November 15, 2020, payable on December 1, 2020, to shareholders of record on November 30, 2020. The equity section of Pacifica’s December 31, 2019, balance sheet showed:

Required:
1. Journalize the declaration of the share dividend. The market prices of the shares were $17.90 on June 30, 2020, and $19.80 on July 15, 2020. Assume share dividends account is used when dividends are declared.

2.Journalize the declaration of the cash dividend. Assume share dividends account is used when dividends are declared.

3. Prepare the equity section of the balance sheet at December 31, 2020, assuming profit earned during the year was $3,389,000.

20. Most of the early trade unions attempted to negotiate _______ agreements with employers. A. closed-shop B. open-shop C. craft-internship D. union-shop