Pepper Company acquired 90 percent of Salt Company's stock at underlying book value on January 1, 20X8. At that date, the fair value of the non-controlling interest was equal to 10 percent of the book value of Salt Company. Salt Co. sold equipment to Pepper Co. for a $360,000 on December 31, 20X8. Salt Co. had originally purchased the equipment for $400,000 on January 1, 20x5, with a useful life of 10 years and no salvage value. At the time of the purchase, Pepper Co. estimated that the equipment still had the same remaining useful life. Both companies use straight-line depreciation. Pepper sold land costing $90,000 to Salt Company on June 28, 20X9, for $122,000.

a)Prepare Pepper’s journal entries related to inter-company sale at December 31, 20X9.

b)Prepare the consolidation entries that related to inter-company sale of land at December 31, 20X9.

c) Prepare the consolidation entries that related to inter-company sale of equipment at December 31, 20X9.

Exercise 17-7

On December 21, 2017, Riverbed Company provided you with the following information regarding its equity investments.

During 2018, Colorado Company stock was sold for $8,550. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—$18,010; Buffaloes Co. stock—$19,430. None of the equity investments result in significant influence.

During the first month of its current fiscal year, Green Co. incurred repair costs of $16,000 on a machine that had 4 years of remaining depreciable life. The repair cost was inappropriately capitalized. Green Co. reported operating income of $164,000 for the current year.

Required:

a. Assuming that Green Co. took a full year's straight-line depreciation expense in the current year, calculate the operating income that should have been reported for the current year.

b. Assume that Green Co.'s total assets at the end of the prior year and at the end of the current year were $941,000 and $1,024,000, respectively. Calculate ROI (based on operating income) for the current year using the originally reported data and then using corrected data. (Round your answers to 1 decimal place.)

c. Indicate the effect on ROI of subsequent years if the error is not corrected.

Ice Cream Sandwich Co. expects EBIT of $300,000 every year forever. Ice Cream Sandwich Co. currently has no debt and its cost of equity is 20%. The firm can borrow at 5%. The corporate tax rate is 33%. The value of the firm is 1005000.

Questions:

a. what will be the value of the firm if Ice Cream Sandwich Co. borrows $280,000 of permanent debt and uses the proceeds to buy back stock?

b. how can Ice Cream Sandwich Co. maximize the value of the firm? What will be the maximum value if there are no costs to financial distress?

c. Suppose that with $280,000 of debt, there is a 13% probability of financial distress, in which case the firm will have a present value of $220,000. What is the value of the firm in this case? Recall that the value of the firm with $280,000 debt and no costs to financial distress was $1,097,400.

Answer for a. 1097400. b. 1500000 c. 983338. How can I get those answers? Please write in detail calculation, dont use the excel.

Dealer Financing On 1/1/X1, Tractor Co. sold a new combine to Jim’s U-Pick farm. The purchase agreement establishes a base price of $100,000, plus a contractual interest rate of 5%, payable in 48 monthly installments of $2,302.93. Control of the combine transferred to Jim when Jim signed the contract and had the combine delivered that same day. If Jim had obtained separate financing (say, a bank loan) for the purchase, his interest rate would have been 6%.

What amount of revenue should Tractor Co. record at the date of sale? What guidance should Tractor Co. apply to the subsequent measurement of its receivable?

Consider the measurement attribute used to record Tractor Co.’s revenues. How does this approach achieve the objective of this measurement attribute?

Hint: You might find it useful to use Microsoft Excel’s formula options: PMT and PV for this example. Excel walks you through how to input numbers into each formula.

In the body, hemoglobin (Hb) is the substance responsible for transporting oxygen (O2) to tissues. Hemoglobin binds oxygen to produce oxyhemoglobin (HbO2):

Hb + O2 ? HbO2

Carbon monoxide (CO) can also bind to hemoglobin to produce carboxyhemoglobin (HbCO):

Hb + CO ? HbCO

The equilibrium constant for Reaction 2 (KCO) is about 210 times larger than the equilibrium constant for Reaction 1 (KO2). Thus, carbon monoxide binds to hemoglobin much more efficiently than oxygen.

KCO/KO2 = 210

a. Write a balanced equation for the displacement of oxygen from HbO2 by CO to produce HbCO. Write the equilibrium constant expression for your overall reaction.

b. Write an expression that relates the equilibrium constant for the overall reaction (i.e., from Question 1) to the equilibrium constants KCO and KO2.

c. Use your balanced equation from part (a) and your knowledge of equilibrium constants to explain why patients who are experiencing CO poisoning are generally given pure oxygen as a remedy.

The financial statements of Flowers Co. appear below:

Flowers Co.

Comparative Balance Sheets

December 31, 2018 - 2019

——————————————————————————————————

Assets                                                                         2019                 2018                                                                                               

Cash                                                                       $ 75,000          $ 150,000

Short-term investments                                             75,000             225,000

Accounts receivable (net)                                       150,000             112,500

Inventory                                                                225,000             262,500

Property, plant and equipment (net)                       975,000          1,125,000

            Total assets                                               $1,500,000      $1,875,000

Liabilities and stockholders' equity

Accounts payable                                                   $ 75,000          $ 112,500

Short-term notes payable                                        150,000             337,500

Bonds payable                                                                    300,000             600,000

Common stock                                                        562,500             562,500

Retained earnings                                                  412,500             262,500

Total liabilities and stockholders' equity           $1,500,000         $1,875,000

Flowers Co.

Income Statement

For the Year Ended December 31, 2019

Net sales                                                                   $1,500,000

Cost of goods sold                                                       937,500

Gross profit                                                                  562,500

Expenses

            Operating expenses               $157,500

            Interest expense                      67,500

                        Total expenses                                     225,000

Income before income taxes                                       337,500

Income tax expense                                                    101,250

Net income                                                               $ 236,250

Required:

a. Using the financial statements, compute the following ratios for Flowers Co. for 2019. Show all computations.                                                                                             

1. Current ratio.                                                          

2. Acid-test ratio.

3. Accounts receivable turnover.                               

4. Inventory turnover.

5. Profit margin.                                                         

6. Return on assets.

7. Assets turnover.                                                     

8. Times interest earned.

9. Working capital.

10. Debt to assets ratio.

b. Prepare a vertical analysis of the 2019 income statement data for Flowers Co.            

c. Based on the ratios calculated in (a), and the vertical analysis in (b), discuss briefly the improvement or lack thereof in financial position and operating results from 2018 to 2019 of Flowers Co.                                                                                                        

1. The cash account for Collegiate Sports Co. on November 1, 20Y9, indicated a balance of $81,145. During November, the total cash deposited was $293,150, and checks written totaled $307,360. The bank statement indicated a balance of $112,675 on November 30, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

   1. Checks outstanding totaled $41,840.
   2. A deposit of $12,200, representing receipts of November 30, had been made too late to appear on the bank statement.
   3. A check for $7,250 had been incorrectly charged by the bank as $2,750.
   4. A check for $760 returned with the statement had been recorded by Collegiate Sports Co. as $7,600. The check was for the payment of an obligation to Ramirez Co. on account.
   5. The bank had collected for Collegiate Sports Co. $7,385 on a note left for collection. The face of the note was $7,000.
   6. Bank service charges for November amounted to $125.
   7. A check for $2,500 from Hallen Academy was returned by the bank because of insufficient funds.

   Required:

   1. Prepare a bank reconciliation as of November 30, 20Y9.

   Collegiate Sports Co.
   Bank Reconciliation
   November 30, 20Y9
   Cash balance according to bank statement		$
   	$
   Total deductions
   Adjusted balance		$
   Cash balance according to company's records		$
   	$
   Total additions
   	$
   Total deductions
   Adjusted balance		$

   2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. If an amount box does not require an entry, leave it blank.

   20Y9 Nov. 30
   Nov. 30

   3. If a balance sheet were prepared for Collegiate Sports Co. on November 30, 20Y9, what amount should be reported as cash?
   $

Bank Reconciliation and Entries

The cash account for Collegiate Sports Co. on November 1, 20Y9, indicated a balance of $81,145. During November, the total cash deposited was $293,150, and checks written totaled $307,360. The bank statement indicated a balance of $112,675 on November 30, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $41,840.
2. A deposit of $12,200, representing receipts of November 30, had been made too late to appear on the bank statement.
3. A check for $7,250 had been incorrectly charged by the bank as $2,750.
4. A check for $760 returned with the statement had been recorded by Collegiate Sports Co. as $7,600. The check was for the payment of an obligation to Ramirez Co. on account.
5. The bank had collected for Collegiate Sports Co. $7,385 on a note left for collection. The face of the note was $7,000.
6. Bank service charges for November amounted to $125.
7. A check for $2,500 from Hallen Academy was returned by the bank because of insufficient funds.

Required:

1. Prepare a bank reconciliation as of November 30, 20Y9.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. If an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Collegiate Sports Co. on November 30, 20Y9, what amount should be reported as cash?
$