Assume the tax rate for each company is 25% in all years. Any tax effects should be adjusted through the deferred tax liability account.

1. Fleming Home Products introduced a new line of commercial awnings in 2020 that carry a one-year warranty against manufacturer’s defects. Based on industry experience, warranty costs were expected to approximate 2% of sales. Sales of the awnings in 2020 were $2,900,000. Accordingly, warranty expense and a warranty liability of $58,000 were recorded in 2020. In late 2021, the company’s claims experience was evaluated, and it was determined that claims were far fewer than expected: 1% of sales rather than 2%. Sales of the awnings in 2021 were $3,400,000, and warranty expenditures in 2021 totaled $77,350.
2. On December 30, 2017, Rival Industries acquired its office building at a cost of $880,000. It was depreciated on a straight-line basis assuming a useful life of 40 years and no salvage value. However, plans were finalized in 2021 to relocate the company headquarters at the end of 2025. The vacated office building will have a salvage value at that time of $640,000.

Required:
For each situation:
1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change, as well as any adjusting entry for 2021 related to the situation described.

Chapman Company obtains 100 percent of Abernethy Company’s stock on January 1, 2020. As of that date, Abernethy has the following trial balance:

During 2020, Abernethy reported net income of $80,000 while declaring and paying dividends of $10,000. During 2021, Abernethy reported net income of $110,000 while declaring and paying dividends of $30,000.

Assume that Chapman Company acquired Abernethy’s common stock for $500,000 in cash. Assume that the equipment and long-term liabilities had fair values of $220,000 and $120,000, respectively, on the acquisition date. Chapman uses the initial value method to account for its investment.

Prepare consolidation worksheet entries for December 31, 2020, and December 31, 2021. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

John Thompson, CEO of NewVenture, Inc., seeks to raise $5 million in equity for his early
stage venture in January 2016. NewVenture is a subscription-based software company that has
experienced 75% revenue growth over the last year. The company generated $2.5 million of
revenue in 2015, with an operating loss of ($450,000). Thompson projects that NewVenture
will achieve $30 million in revenue by 2020. Samantha Jones of Gorsuch Capital is considering
an investment in January 2016, offering pre-money valuation of $14.75 million.
a. What is the post-money valuation of NewVenture?
b. What share of the company will Samantha Jones require?
c. The company has 1,000,000 shares outstanding before the investment. How many new
shares should she purchase, and at what price per share?

Samantha Jones believes Thompson will have to grant generous stock options in addition to
the salaries projected in his business plan. From experience, she thinks management should
have the ability to own at least a 15% share of the company in the form of options by the end
of year 5.

f. What share of the company should Samantha insist on getting today if an option pool is
created after her investment? (in order to ensure that she will still maintain the same
ownership level noted above)
g. How many shares are allocated to Jones and the option pool in this case?

McGuire Company acquired 90 percent of Hogan Company on January 1, 2019, for $234,000 cash. This amount is reflective of Hogan’s total acquisition-date fair value. Hogan's stockholders' equity consisted of common stock of $160,000 and retained earnings of $80,000. An analysis of Hogan's net assets revealed the following:

Any excess consideration transferred over fair value is attributable to an unamortized patent with a useful life of 5 years.

In consolidation at December 31, 2020, what net adjustment is necessary for Hogan's Patent account?

Multiple Choice

• $4,200.

• $5,500.

• $8,000.

• $6,600.

Imagine that a company has a problem or wants to make some sort of improvement. The company sends out a request for proposals; you receive one and respond with a proposal. You offer to come in, investigate, interview, make recommendations—and present it all in the form of a report.

How do the four factors of Porter's Diamond of National Advantage help us understand a nations competitive advantage (or lack thereof) in particular industries in 2020

You are considering investing in a start up company. The founder asked you for $ 260 comma 000 today and you expect to get??$ 980 comma 000 in 13 years. Given the riskiness of the investment? opportunity, your cost of capital is 24 %. What is the NPV of the investment? opportunity? Should you undertake the investment? opportunity? Calculate the IRR and use it to determine the maximum deviation allowable in the cost of capital estimate to leave the decision unchanged. What is the NPV of the investment? opportunity?