Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:
| Debit | Credit | ||||
| Accounts payable | $ | 51,900 | |||
| Accounts receivable | $ | 43,100 | |||
| Additional paid-in capital | 50,000 | ||||
| Buildings (net) (4-year remaining life) | 175,000 | ||||
| Cash and short-term investments | 75,500 | ||||
| Common stock | 250,000 | ||||
| Equipment (net) (5-year remaining life) | 439,500 | ||||
| Inventory | 127,000 | ||||
| Land | 116,500 | ||||
| Long-term liabilities (mature 12/31/23) | 170,500 | ||||
| Retained earnings, 1/1/20 | 464,900 | ||||
| Supplies | 10,700 | ||||
| Totals | $ | 987,300 | $ | 987,300 | |
During 2020, Abernethy reported net income of $87,000 while declaring and paying dividends of $11,000. During 2021, Abernethy reported net income of $122,500 while declaring and paying dividends of $55,000.
Assume that Chapman Company acquired Abernethy’s common stock for $873,250 in cash. As of January 1, 2020, Abernethy’s land had a fair value of $129,800, its buildings were valued at $243,800, and its equipment was appraised at $403,750. Chapman uses the equity method for this investment.
Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021.
In: Accounting
The separate condensed balance sheet of Patrick Corporation and its wholly-owned subsidiary, Sean Corporation, are as follows:
|
Balance Sheets December 31, 2020 |
||
|
Patrick |
Sean |
|
|
Cash |
$ 80,000 |
$ 60,000 |
|
Accounts Receivable (net) |
140,000 |
25,000 |
|
Inventories |
90,000 |
50,000 |
|
Plant & equipment (net) |
625,000 |
280,000 |
|
Investment in Sean |
460,000 |
|
|
Total Assets |
$ 1,395,000 |
$ 415,000 |
|
Accounts Payable |
$ 160,000 |
$ 95,000 |
|
Long-term Debt |
110,000 |
30,000 |
|
Common Stock ($10 par) |
340,000 |
50,000 |
|
Additional paid-in capital |
10,000 |
|
|
Retained Earnings |
785,000 |
230,000 |
|
Total Liabilities & Stockholders’ Equity |
$1,395,000 |
$415,000 |
Additional Information:
* On December 31, 2020, Patrick acquired 100% of Sean’s voting
stock in exchange for $460,000.
* At the acquisition date, the fair values of Sean’s assets and
liabilities equaled their carrying amounts, respectively, except
that the fair value of certain items in Sean’s inventory were
$25,000 more than their carrying amounts.
1. In the December 31, 2020,
consolidated balance sheet of Patrick and its subsidiary, what
amount
of total assets should be reported?
2. In the December 31, 2020,
consolidated balance sheet of Patrick and its subsidiary, what
amount
of total stockholders’ equity should be reported?
In: Accounting
Apply the following facts to the next two questions.
The publication of the original UCC in 1952 sparked an expansion of the statute of frauds in the United States to cover sales of goods of $500 or more. At about the same time (in 1954), the British Parliament repealed its longstanding statute of frauds as applied to sales of goods. Some have argued that we should scrap UCC §2-201 on the grounds that it encourages misdealing as much as it prevents fraud. Consider the following two hypotheticals:
(In the United States) Johnny is looking at a used Chevy Tahoe. He knows that the $7,000 price is a good one, but he wants to go online and see if he can find an even better deal. In the 20 minutes he has been with the car’s current owner, the owner has received three phone calls about the car. Johnny wants to make sure that no one else buys the car while he is thinking the deal over, so he makes a verbal agreement to buy the car and shakes the seller’s hand. He knows that because of the statute of frauds and the fact that nothing is in writing, he does not yet have any enforceable obligation to buy the car.
(In the United Kingdom) Nigel sells used Peugeots in Liverpool. When he senses interest from customers, he aggressively badgers them until they verbally commit to buy. If the customers later get cold feet and try to back out of the deal, he holds them to the verbal contracts. Because there is no longer a UCC-style statute of frauds in Britain, the buyers are stuck
In: Computer Science
| 5. | At your local family fun center, miniature golf is $12 per person for unlimited rounds in a day, while each go-kart session is $8. If you played 3 rounds of miniature golf and rode the go-karts 3 times, what was the marginal cost of the3rd round of miniature golf? What was the marginal cost of the3rd go-kart session? | ||||||||
|
| 6. | How can a country producing more capital goods rather than consumption goods end up in the future with a PPF that is larger than a country that produces more consumption goods and fewer capital goods? | ||||||||
|
| 7. | The issue of climate change has risen to the forefront of economic discussion, especially among industrialized countries such as the United States and those in Europe. Critics, however, argue that greater environmental regulations restrict economic growth. How might relatively wealthy countries react differently to this tradeoff compared to poor countries? | ||||||||
|
| 8. | According to By the Numbers, in which period did corn and soybean production increase more in terms of yield per acre? | ||||||||
|
| 9. | The economy can grow as a result of all of the following EXCEPT: | ||||||||
|
| 10. | In which of the following questions will technology play the greatest role? | ||||||||
|
| 11. | In relation to the Production Possibilities Frontier (PPF), which of the following demonstrates unemployment? | ||||||||
|
| 12. | According to By the Numbers, during the period between 1997 and 2014, in how many years did the U.S. trade balance improve from the previous year and in how many years did the trade balance deteriorate (assume the trade balance deteriorated from 1996 [not shown in the figure] to 1997)? | ||||||||
|
| 13. | Why does America use heavy street-cleaning machines driven by one person to clean the streets, while China and India use many people with brooms to do the same job? | ||||||||
|
| 14. | At the 2015 White House Science Fair, a $240 million private-public initiative was announced for the purpose of boosting STEM (science, technology, engineering, and math) education, as the United States continues to fall behind other industrialized nations in student achievement in these fields. How would spending on STEM initiatives today, which leads to higher costs in the near term, pay off in future benefits to the economy? | ||||||||
|
| 15. | You normally stay at home on Wednesday nights and study. However, next Wednesday night, your best friend is having his big 21st birthday party. You have to make a choice. This is an example of: | ||||||||
|
In: Economics
In: Economics
In an article in the Journal of Advertising, Weinberger and Spotts compare the use of humor in television ads in the United States and in the United Kingdom. Suppose that independent random samples of television ads are taken in the two countries. A random sample of 400 television ads in the United Kingdom reveals that 146 use humor, while a random sample of 500 television ads in the United States reveals that 124 use humor.
(b) Test the hypotheses you set up in part a by using critical values and by setting α equal to .10, .05, .01, and .001. How much evidence is there that the proportions of U.K. and U.S. ads using humor are different? (Round the proportion values to 3 decimal places. Round your answer to 2 decimal places.)
| z |
(c) Set up the hypotheses needed to attempt to establish that the difference between the proportions of U.K. and U.S. ads using humor is more than .05 (five percentage points). Test these hypotheses by using a p-value and by setting α equal to .10, .05, .01, and .001. How much evidence is there that the difference between the proportions exceeds .05? (Round the proportion values to 3 decimal places. Round your z value to 2 decimal places and p-value to 4 decimal places.)
| z | |
| p-value |
(d) Calculate a 95 percent confidence interval for the difference between the proportion of U.K. ads using humor and the proportion of U.S. ads using humor. Interpret this interval. Can we be 95 percent confident that the proportion of U.K. ads using humor is greater than the proportion of U.S. ads using humor? (Round the proportion values to 3 decimal places. Round your answers to 4 decimal places.)
95% of confidence interval [ ___ , ____ ]
In: Statistics and Probability
On January 1, 2020, Jordan Inc. purchased 30% of the outstanding common stock of Melody Corporation at a cost of $600,000. Melody Corporation had 800,000 shares of common stock outstanding. At the date of purchase, the book value of Melody’s net assets was $1,500,000. Book value and fair value of net assets were the same for all balance sheet items except for machinery and inventory. The fair value exceeded the book value by $200,000 for machinery and $50,000 for the Inventory.
The estimated useful life of machinery is 15 years and all inventory acquired was sold during 2020. Both companies have a January through December fiscal year. Melody Corporation reported net income of $250,000 and paid cash dividend of $80,000 during 2020. Market value of Melody Corporation was $2.50 per share at December 31, 2020.
1- Prepare the entry to record the original investment in Mountain.
2-Compute the amount of goodwill (if any) on the acquisition.
3-Prepare the necessary entries (other than acquisition) for 2020.
4-Assume that on January 10, 2020 Jordan Inc. sold 50% of its investment in Melody Corporation for $290,000. Prepare the journal entry to record the sale of investment.
5-Assume that subsequent to selling 50% of the investment, Melody Corporation reported income of $300,000 and paid dividend of $100,000 for 2021. Market value of Melody Corporation’s common stock was $3 per share at December 31, 2021. Prepare the journal entries (if any) for Jordan Inc. for its investment in Melody Corporation for 2021.
In: Accounting
On 1/1/2016, California Corporation purchased 75% of the outstanding voting stock of San Diego Corporation for $2,400,000 paid in cash. On the date of the acquisition, San Diego’s shareholders’ equity consisted of the following:
Common stock, $10 par $1,000,000
APIC 600,000
Retained Earnings 800,000
Total SE $2,400,000
The excess fair value of the net assets acquired was assigned 10% to undervalued Inventory (sold in 2016), 40% to undervalued PPE assets with a remaining useful life of 8 years, and 50% to Goodwill.
Comparative trial balances of California Corporation and San Diego Corporation at December 31, 2020, are as follows:
|
California |
San Diego |
|
|
Other assets – net |
3,765,000 |
2,600,000 |
|
Investment in San Diego |
2,340,000 |
- |
|
Expenses (including cost of sales) |
3,185,000 |
600,000 |
|
Dividends |
500,000 |
200,000 |
|
9,790,000 |
3,400,000 |
|
|
Common Stock, $10 par value |
(3,000,000) |
(1,000,000) |
|
APIC |
(850,000) |
(600,000) |
|
Retained earnings |
(1,670,000) |
(800,000) |
|
Sales revenues |
(4,000,000) |
(1,000,000) |
|
Income from San Diego |
(270,000) |
- |
|
(9,790,000) |
(3,400,000) |
Required:
Determine the amounts that would appear in the consolidated financial statements of California Corporation and its subsidiary for each of the following items:
In: Finance
On 1/1/2016, XYZ Corporation purchased 75% of the outstanding voting stock of Sally Corporation for $2,400,000 paid in cash. On the date of the acquisition, Sally’s shareholders’ equity consisted of the following:
Common stock, $10 par $1,000,000
APIC 600,000
Retained Earnings 800,000
Total SE $2,400,000
The excess fair value of the net assets acquired was assigned 10% to undervalued Inventory (sold in 2016), 40% to undervalued PPE assets with a remaining useful life of 8 years, and 50% to Goodwill.
Comparative trial balances of XYZ Corporation and Sally Corporation at December 31, 2020, are as follows:
|
California |
San Diego |
|
|
Other assets – net |
3,765,000 |
2,600,000 |
|
Investment in Sally |
2,340,000 |
- |
|
Expenses (including cost of sales) |
3,185,000 |
600,000 |
|
Dividends |
500,000 |
200,000 |
|
9,790,000 |
3,400,000 |
|
|
Common Stock, $10 par value |
(3,000,000) |
(1,000,000) |
|
APIC |
(850,000) |
(600,000) |
|
Retained earnings |
(1,670,000) |
(800,000) |
|
Sales revenues |
(4,000,000) |
(1,000,000) |
|
Income from Sally |
(270,000) |
- |
|
(9,790,000) |
(3,400,000) |
Required:
Determine the amounts that would appear in the consolidated financial statements of XYZ Corporation and its subsidiary for each of the following items:
In: Accounting
Assume today is March 16, 2016. Natasha Kingery is 30
years old and has a Bachelor of Science degree in computer
science.
She is currently employed as a Tier 2 field service representative
for a telephony corporation located in Seattle,
Washington, and earns $38,000 a year that she anticipates will grow
at 3% per year. Natasha hopes to retire at age 65 and
has just begun to think about the future.
Natasha has $75,000 that she recently inherited from her aunt. She
invested this money in 30-year Treasury Bonds. She is
considering whether she should further her education and would use
her inheritance to pay for it.
She has investigated a couple of options and is asking for your
help as a financial planning intern to determine the
financial
consequences associated with each option. Natasha has already been
accepted to both of these programs, and could start
either one soon.
One alternative that Natasha is considering is attaining a
certification in network design. This certification would
automatically promote her to a Tier 3 field service representative
in her company. The base salary for a Tier 3
representative is $10,000 more than what she currently earns and
she anticipates that this salary differential will grow at a
rate of 3% a year as long as she keeps working. The certification
program requires the completion of 20 Web- based courses
and a score of 80% or better on an exam at the end of the course
work. She has learned that the average amount of time
necessary to finish the program is one year. The total cost of the
program is $5000, due when she enrolls in the program.
Because she will do all the work for the certification on her own
time, Natasha does not expect to lose any income during
the certification.
Another option is going back to school for an MBA degree. With an
MBA degree, Natasha expects to be promoted to a
managerial position in her current firm. The managerial position
pays $20,000 a year more than her current position. She
expects that this salary differential will also grow at a rate of
3% per year for as long as she keeps working. The evening
program, which will take three years to complete, costs $25,000 per
year, due at the beginning of each of her three years in
school. Because she will attend classes in the evening, Natasha
doesn’t expect to lose any income while she is earning her
MBA if she chooses to undertake the MBA.
1. Determine the interest rate she is currently earning on her
inheritance by going to Yahoo! Finance
(http://finance.yahoo.com) and typing the word “Treasury” in the
search field and picking the 30 year yield
(ticker: ^TYX) off the dynamic menu that appears. Then go to
“Historical Prices” (located in the left column) and
enter the appropriate date, March 16, 2016 to obtain the closing
yield or interest rate that she is earning. Use this
interest rate as the discount rate for the remainder of this
problem.
2. Create a timeline in Excel for her current situation, as well as
the certification program and MBA degree options,
using the following assumptions:
Salaries for the year are paid only once, at the end of the
year.
The salary increase becomes effective immediately upon graduating
from the MBA program or being certified.
That is, because the increases become effective immediately but
salaries are paid at the end of the year, the first
salary increase will be paid exactly one year after graduation or
certification.
3. Calculate the present value of the salary differential for
completing the certification program. Subtract the cost of
the program to get the NPV of undertaking the certification
program.
4. Calculate the present value of the salary differential for
completing the MBA degree. Calculate the present value of
the cost of the MBA program. Based on your calculations, determine
the NPV of undertaking the MBA.
5. Based on your answers to Questions 3 and 4, what advice would
you give to Natasha? What if the two programs
are mutually exclusive? That is, if Natasha undertakes one of the
programs there is no further benefit to
undertaking the other program. Would your advice be different?
In: Finance