On January 1, 2020, Parent Company purchased 80% of the common stock of Subsidiary Company for $320,000.

• On this date, Subsidiary had common stock, other paid-in capital, and retained earnings of $40,000, $120,000, and $190,000, respectively.
• Net income and dividends for Subsidiary Company were $50,000 and $10,000, respectively.
• Parent Company has used the simple equity method for recording the Subsidiary income and dividends.
• On January 1, 2020, the only tangible assets of Subsidiary that were undervalued were inventory and equipment. Inventory was worth $5,000 more than cost. Equipment, which was worth $15,000 more than book value, has a remaining life of 5 years, and straight-line depreciation is used. Any remaining excess is goodwill.

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The following trial balances of the two companies are prepared on December 31, 2020.

Required:

d. Prepare the consolidated worksheet.

e. Prepare the 2020 consolidated income statement and balance sheet.

Management of Johnson & Johnson desperately needs a strategic plan to save its Tylenol[1]business, but first some background. According to Johnson & Johnson,

Johnson & Johnson has been a part of people's lives for 128 years and a valuable part of their investments for approximately 70 years. Founded in 1886, we listed our shares on the New York Stock Exchange for public investors in 1944.

During our history, we have built the most comprehensive base of healthcare businesses in the world, generating approximately 70 percent of our revenues from No. 1 or No. 2 global leadership positions in our respective markets.

Our consistent performance has enabled us to deliver an exceptional track record of growth that few, if any, companies can claim: 30 consecutive years of adjusted earnings increases; and 52 consecutive years of dividend increases.[2]

In 2013, the company had revenue of $71.3 billion[3]mostly from healthcare, such as skin-care products, nutritional products, over-the-counter and prescription pharmaceuticals, medical devices, and diagnostic tools.  Johnson & Johnson products are found in virtually every home, hospital, operating room and doctor’s office in 188 countries worldwide.

In 1955, McNeil Laboratories introduced Tylenol, the first pain reliever without aspirin.  The product was so successful regionally that Johnson & Johnson acquired the company in 1959 to expand the business globally.

This morning, Amazon announced the acquisition of a small pharmaceutical company which had secretly developed and patented a pain reviver which is much more effective than Tylenol.  Although Tylenol has an excellent reputation, Johnson & Johnson cannot reformulate it.  Management needs a new strategy to combat Amazon and save the Tylenol business. Help them by answering the 13 questions starting on the following page.

1.     Describe two (no more!) important opportunities and two (no more!) important threats facing Johnson & Johnson’s Tylenol business, including the individual combination of strengths/weaknesses and external factors creating each.  (10 points)​

A growing concern of employers is time spent in activities like surfing the Internet and e-mailing friends during work hours. The San Luis Obispo Tribune summarized the fundings from a survey of a large sample of workers in an article that ran under the headline "Who Goofs Off 2 Hours a Day? Most Workers, Survey Says" (August 3, 2006). Suppose that the CEO of a large company wants to determine whether the average amount of wasted time during an 8-hour work day for employees of her company is less than the reported 120 minutes. Each person in a random sample of 12 employees was contacted and asked about daily wasted time at work. The resulting data are the following:

108 112 117 128 130 111 131 116 113 113 105 128

Is the following statement "These data provide evidence that the mean wasted time for this company is less than 120 minutes with significance level alpha equals 0.05" true or false?

First and Ten Corporation’s stock returns have a covariance with the market portfolio of .0511. The standard deviation of the returns on the market portfolio is 22 percent and the expected market risk premium is 6.4 percent. The company has bonds outstanding with a total market value of $56.9 million and a yield to maturity of 6.7 percent. The company also has 6.1 million shares of common stock outstanding, each selling for $32. The company’s CEO considers the firm’s current debt-equity ratio optimal. The corporate tax rate is 24 percent and Treasury bills currently yield 4.5 percent. The company is considering the purchase of additional equipment that would cost $58.5 million. The expected unlevered cash flows from the equipment are $19.25 million per year for 5 years. Purchasing the equipment will not change the risk level of the firm. Calculate the NPV of the project. (Do not round intermediate calculations and enter your answer in dollars, not millions of dollars, rounded to 2 decimal places, e.g., 1,234,567.89)