On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Additional information: Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end.
Here is Starfruit Company’s trial balance at December 31, 2020:
Dr (Cr)
Current assets $28,200,000
Plant & equipment, net 188,000,000
Intangibles 2,000,000
Liabilities (180,000,000)
Capital stock (1,000,000)
Retained earnings, January 1 (29,500,000)
Acumulated other comprehensive income, January 1 (500,000)
Dividends 400,000
Sales revenue (24,000,000)
Cost of goods sold 10,000,000
Operating expenses 6,500,000
Other comprehensive income (100,000)
Question:
On the 2020 consolidated income statement, the noncontrolling interest in net income of Starfruit is
$150,000
$175,000
$200,000
$750,000
In: Accounting
On January 1, 2018, Pomegranate Company acquired 90% of the voting stock of Starfruit Company for $91,700,000 in cash. The fair value of the noncontrolling interest in Starfruit at the date of acquisition was $6,300,000. Starfruit’s book value was $13,000,000 at the date of acquisition. Starfruit’s assets and liabilities were reported on its books at values approximating fair value, except its plant and equipment (10-year life, straight-line) was overvalued by $25,000,000. Starfruit Company had previously unreported intangible assets, with a market value of $40,000,000 and 5-year life, straight-line, which were capitalized following GAAP.
Additional information:
Pomegranate uses the complete equity method to account for its investment in Starfruit on its own books. Goodwill recognized in this acquisition was impaired by a total of $2,000,000 in 2018 and 2019, and by $500,000 in 2020. It is now December 31, 2020, the accounting year-end. Here is Starfruit Company’s trial balance at December 31, 2020:
| Dr (Cr) | |
|---|---|
| Current assets | $28,200,000 |
| Plant & equipment, net | 188,000,000 |
| Intangibles | 2,000,000 |
| Liabilities | (180,000,000) |
| Capital stock | (1,000,000) |
| Retained earnings, January 1 | (29,500,000) |
| Acumulated other comprehensive income, January 1 | (500,000) |
| Dividends | 400,000 |
| Sales revenue | (24,000,000) |
| Cost of goods sold | 10,000,000 |
| Operating expenses | 6,500,000 |
| Other comprehensive income | (100,000) |
| $ 0 |
On the 2020 consolidation working paper, eliminating entry (R) reduces the Investment in Starfruit by
$ 3,600,000
$64,800,000
$68,200,000
$81,000,000
In: Accounting
On January 1, 2017, Nobel Corporation acquired machinery at a cost of $1,200,000. Nobel adopted the straight-line method of depreciation for this machine and had been recording depreciation over an estimated life of ten years, with no residual value. At the beginning of 2020, a decision was made to change the residual value to $100,000. The amount that Nobel should record as depreciation expense for 2020 is
In: Accounting
NGD recently acquired a new piece of land in Suffolk County on April 1, 2012. The land cost $5,000,000. NGD reports under IFRS and revalues its land. On December 31, 2017, the fair value of the land is $4,500,000. On December 31, 2020, the fair value of the land is $5,300,000.
Provide all necessary journal entries for 2012 through 2020.
In: Accounting
A variety of robots were featured at the 2016 National Restaurant Show that could be used for a variety of tasks in restaurants. These robots are being introduced at the same time that we are experiencing an on-going debate in the U.S. about the merits of a national minimum wage of $15 per hour for every worker. A former McDonald’sUSA CEO, Ed Rensi, recently said that purchasing a $35,000 robotic arm would be cheaper than paying fast food workers $15 per hour for food preparation tasks like bagging French fries.
For this hypothetical example, let’s make the following assumptions:
| a. | For the cost of the hourly workers, use a total wage rate of $18 per hour to reflect payroll taxes (payroll taxes can add 15% or more to the hourly wage rate.) |
| b. | Assume that freight and installation for the robot’s initial placement in a McDonald’s restaurant will be a one-time cost of $5,000. |
| c. | The robot will require periodic service. Assume an annual service contract is required that costs 10% of the original cost plus installation of the robot per year. |
| d. | Assume that the robot will replace 10 employee hours per day, 360 days per year (the robot will not, at least initially, be as versatile as a person and cannot fully eliminate all food prep workers at this point.) |
| e. | Electricity and supplies consumed by the robot will be assumed to be $1,500 per year. |
What would the payback period be for a robotic arm used by McDonald's for food preparation?
In: Accounting
Hirsch Company acquired equipment at the beginning of 2017 at a cost of $128,000. The equipment has a five-year life with no expected salvage value and is depreciated on a straight-line basis. At December 31, 2017, Hirsch compiled the following information related to this equipment:
| Expected future cash flows from use of the equipment | $ | 109,300 | |
| Present value of expected future cash flows from use of the equipment | 95,000 | ||
| Fair value (selling price less costs to dispose) | 90,910 | ||
Assume that a U.S.–based company is issuing securities to foreign investors who require financial statements prepared in accordance with IFRS. Thus, adjustments to convert from U.S. GAAP to IFRS must be made. Ignore income taxes.
Required:
1.Prepare journal entries for this equipment for the years ending December 31, 2017, and December 31, 2018, under (1) U.S. GAAP and (2) IFRS.
- Record the entry for the purchase of equipment as per U.S. GAAP.
- Record the entry for the expense on depreciation of equipment as per U.S. GAAP
- Record the entry for the purchase of equipment as per IFRS.
- Record the entry for the expense on depreciation of equipment as per IFRS.
- Record the entry for the loss on impairment of equipment as per IFRS.
- Record the entry for the loss on impairment of equipment as per U.S. GAAP.
- Record the entry for the expense on depreciation of equipment as per U.S. GAAP.
- Record the entry for the expense on depreciation of equipment as per IFRS.
2. Prepare the entry(ies) that Hirsch would make on the December 31, 2017, and December 31, 2018, conversion worksheets to convert U.S. GAAP balances to IFRS. Ignore the possibility of any additional impairment at the end of 2018.
- Record the entry for the loss on impairment of equipment due to conversion from U.S. GAAP to IFRS.
- Record the entry for the loss on impairment of equipment due to conversion from U.S. GAAP to IFRS.
- Record the entry for reversing additional depreciation already recognized due to conversion from U.S. GAAP to IFRS
In: Accounting
Using the internet, find the annual salary of the CEO of any company of your choosing.
In: Finance
What part of the business cycle the U.S. economy is currently in 2020? Why? What factors lead you to this conclusion?
In: Economics
Derive the NEER & REER [Purchasing Power Parity (“PPP”)] for the U.S. and China over several years. (1880-2020)
In: Accounting
Thunderhorse Oil is a U.S. oil company. Its current cost of debt is
7.307.30%,
and the 10-year U.S. Treasury yield, the proxy for the risk-free rate of interest, is
3.103.10%.
The expected return on the market portfolio is
8.708.70%.
The company's effective tax rate is
3535%.
Its optimal capital structure is
8080%
debt and
2020%
equity.a. If Thunderhorse's beta is estimated at
0.900.90,
what is Thunderhorse's weighted average cost of capital?b. If Thunderhorse's beta is estimated at
0.600.60,
significantly lower because of the continuing profit prospects in the global energy sector, what is Thunderhorse's weighted average cost of capital?
a. If Thunderhorse's beta is estimated at
0.900.90,
what is Thunderhorse's weighted average cost of capital?
In: Finance