Maxwell Company manufactures and sells a single product. Price and cost data regarding Maxwell’s product and operations for fiscal year 2016 are as follows (presented under absorption or full costing):

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Revenue (120,000 units)                                                                      $3,000,000

Less: Cost of sales

          Direct materials                                                  $1,320,000

          Directed Labor                                                        600,000

          Variable manufacturing overhead                          300,000

          Fixed manufacturing overhead                               192,000        2,412,000

Gross margin                                                                                          $588,000

Less: Variable selling expenses                                       $156,000

          Fixed selling and administrative expenses              276,000          432,000                

Net income                                                                                              $156,000

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a. Compute the number of units required to be produced and sold in order to earn direct costing profits of $260,000 in 2017; you may assume that in 2017, fixed costs, as well as per unit variable cost and (per unit) selling prices are the same as for fiscal year 2016.

b. Answer this question independently of part (a) above. Now suppose that Maxwell’s management believes that direct labor costs will increase by 8 percent in fiscal year 2017, but all other variable costs per unit, fixed costs, and selling prices will remain as in 2016. Compute the breakeven point in units for 2017 based on these assumptions.

Preparing the [I] consolidation entries for sale of depreciable assets—Equity method Assume that on January 1, 2016, a parent sells to its wholly owned subsidiary, for a sale price of $162,000, equipment that originally cost $184,000. The parent originally purchased the equipment on January 1, 2012, and depreciated the equipment assuming a 10-year useful life (straight-line with no salvage value). The subsidiary has adopted the parent’s depreciation policy and depreciates the equipment over the remaining useful life of 6 years. The parent uses the equity method to account for its Equity Investment. a. Compute the annual pre-consolidation depreciation expense for the subsidiary (postintercompany sale) and the parent (pre-intercompany sale). Subsidiary - depreciation $Answer Parent - depreciation $Answer b. Compute the pre-consolidation Gain on Sale recognized by the parent during 2016. $Answer c. Prepare the required [I] consolidation entry in 2016 (assume a full year of depreciation). Description Debit Credit [lgain] Equipment [ldep] d. Prepare the required [l] consolidation entry in 2019 (assuming the subsidiary is still holding the equipment). Description Debit Credit [lgain] Equipment [ldep]

7. Measuring standalone risk using realized (historical) data

Returns earned over a given time period are called realized returns. Historical data on realized returns is often used to estimate future results. Analysts across companies use realized stock returns to estimate the risk of a stock.

Consider the case of Happy Dog Soap Inc. (HDS):

Five years of realized returns for HDS are given in the following table. Remember:

Given the preceding data, the average realized return on HDS’s stock is _________ .

The preceding data series represents _________ of HDS’s historical returns. Based on this conclusion, the standard deviation of HDS’s historical returns is _________ .

If investors expect the average realized return from 2012 to 2016 on HDS’s stock to continue into the future, its coefficient of variation (CV) will be __________ .

1. Venture capitalist X invests in 20% (1,000,000 shares of common stock) of a company for $10 million dollars and in the next round of financing the company issues an additional 5 million shares of common stock to venture capitalist Z for $5 million dollars. The stake of Venture capitalist X in the company is reduced to 10%. This is an example of dilution. (True or False)

2. One way for individuals who are not accredited investors to gain exposure to venture capital investments is to invest in public companies that are actively involved in funding startups (True or False)

3.

Investors who bought the series D convertible preferred stock issued by Zoom in 2016 and then sold the shares in the IPO earned an annual rate of return of between 105% and 110%. (assume the purchase was on January 1^st, 2016 and the sale was on December 31^st, 2019). (True or False)

4. Preferred shares that are sold to venture capitalists give the venture capitalists preferred rights to residual economic value relative to the rights of common shares. (True or False)

Use the following information for questions 86–88.

At the beginning of 2015; Elephant, Inc. had a deferred tax asset of $4,000 and a deferred tax liability of $6,000. Pre-tax accounting income for 2015 was $300,000 and the enacted tax rate is 40%. The following items are included in Elephant’s pre-tax income:

86.     What is Elephant, Inc.’s taxable income for 2015?

a.   $300,000

b.   $252,000

c.   $348,000

d.   $452,000

87.     Which of the following is required to adjust Elephant, Inc.’s deferred tax asset to its correct balance at December 31, 2015?

a.   A debit of $20,800

b.   A credit of $15,200

c.   A debit of $15,200

d.   A debit of $16,800

the answer is D why ???

88.     The ending balance in Elephant, Inc’s deferred tax liability at December 31, 2015 is

a.   $9,200

b.   $15,200

c.   $10,400

d.   $31,200

the answer is B why ???

Goodwill

Composite Company is considering purchasing EKC Company. EKC's balance sheet at December 31, 2016, is as follows:

At December 31, 2016, Composite discovered the following about EKC:

No allowance for uncollectible accounts has been established. An allowance of $4,200 is considered appropriate.

The LIFO inventory method has been used. The FIFO inventory method would be used if EKC were purchased by Composite. The FIFO inventory valuation of the December 31, 2016, ending inventory would be $172,000.

The fair value of the property, plant, and equipment (net) is $760,000.

The company has an unrecorded patent that is worth $100,000.

The book values of the current liabilities and bonds payable are the same as their market values.

Required:

1. Compute the value of the goodwill if Composite pays $1,425,800 for EKC.

$

2. Why would the book value of a company's identifiable net assets differ from its market value?

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Memorial Hospital calculated certain performance measures from their 2017 financial statements listed below.

The same performance measures for 2016 are listed for comparison.

Please indicate if the increase or decrease from 2016 to 2017 in these performance measures is beneficial to the organization or not and explain why.

This questions is asking for the increase or decrease of each individual performance measure to be analyzed (positive or negative contribution to the organization) and explained.

It is NOT asking for an overall analysis of the numbers. Please list if the performance measure increasing or decreasing is good or bad for the organization and why

interest During Construction

Zimmer Company is constructing a production complex that qualifies for interest capitalization. The following information is available:

Capitalization period: January 1, 2016, to June 30, 2017

Expenditures on project:

Amounts borrowed and outstanding:
   $1.5 million borrowed at 10%, specifically for the project
   $7 million borrowed on July 1, 2015, at 12%
   $17 million borrowed on January 1, 2011, at 6%

Required:

Note: Round all final numeric answers to the nearest dollar.

Compute the amount of interest costs capitalized each year.

If it is assumed that the production complex has an estimated life of 25 years and a residual value of $0, compute the straight-line depreciation in 2017.

$

Since GAAP requires accrual accounting, if a company capitalizes interest during the construction period it will report income than if it had not capitalized interest. In future periods, the same company will report income than if it had not capitalized interest.