A parent purchased a 70% controlling interest in its sub several years ago. The aggregate fair value of the controllingand NCI was $350,000 in excess of the sub's SHE on acquisition date. The excess was assigned to a building that wasestimated to be undervalued by $200,000 and to an unrecorded patent valued at $150,000. The building is depreciatedover a 16-year period and patent is amortized over an 8-year period. During the current year, the parent and subreported a total of $600,000 of I/C sales. The BOY there were $40,000 of upstream I/C profits in the parent's inventory.At the end of the current year, there were $60,000 of downstream intercompany profits in the sub's inventory. Duringthe current year, the sub declare and paid $80,000 in dividends.ParentSub[l-r]Sales$10,000,000$1,000,000Cost of goods sold(6,800,000)(600,000)Gross profit3,200,000400,000[l-e]Income from sub37,125Operating expenses(1,800,000)(270,000)[l-d]Net income$1,437,125$130,000Compute the Income from Sub of $37,125Consolidated Income StatementSalesCost of goods soldGross profitOperating expensesNet incomeNet income attributable to noncontrollinginterestsNet income attributable to the parent

Non-controlling interest refers to the ownership concept when the shareholder of the company owns…

be undervalued by $200,000 and to an unrecorded r period and patent is amortized over an 8-year per tal of $600,000 of I/C sales. The BOY there were $4 the current year, there were $60,000 of downstrea ear, the sub declare and paid $80,000 in dividends. Is sold Parent $10,000,000 (6,800,000) 3,200,000 Sub $1,000,000 (600,000) 400,000

be undervalued by $200,000 and to an unrecorded r period and patent is amortized over an 8-year per tal of $600,000 of I/C sales. The BOY there were $4 the current year, there were $60,000 of downstrea ear, the sub declare and paid $80,000 in dividends. Is sold Parent $10,000,000 (6,800,000) 3,200,000 Sub $1,000,000 (600,000) 400,000

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Falkland, Inc., is considering the purchase of a patent that has a cost of $51,000 and an estimated revenue producing life of 4 years. Falkland has a cost of capital of 8%. The patent is expected to generate the following amounts of annual Income and cash flows: Year 3 Year 4 Year 1 Year 2 $5,100 $6,500 17,200 18,700 18,050 14,650 $6,300 $3,000 Net Income Operating cash flows (Click here to see present value and future value tables) A. What is the NPV of the Investment? Round your present value factor three decimal places and final answer to the nearest dollar. B. What happens if the required rate of return Increases? If the required rate of return Increases, the NPV will be lower ✓.
Upper Division of Lower Company acquired an asset with a cost of $580,000 and a four-year life. The cash flows from the asset, considering the effects of inflation, were scheduled as follows. Year Cash Flow 1 $ 210,000 2 250,000 3 285,000 4 320,000 The cost of the asset is expected to increase at a rate of 20 percent per year, compounded each year. Performance measures are based on beginning-of-year gross book values for the investment base. Ignore taxes. Required: a. What is the ROI for each year of the asset's life, using a historical cost approach? b. What is the ROI for each year of the asset's life if both the investment base and depreciation are determined by the current cost of the asset at the start of each year?
Caddis Company acquired a building with a loan that requires payments of $19,000 every six months for 3 years. The annual interest rate on the loan is 8%. What is the present value of the building? (PV of $1, FV of $1, PVA of $1, and FVA of $1) (Use appropriate factor(s) from the tables provided.) Multiple Choice O O O O $99,600 $114,000 $38,988 $65,402 $48,965
Purchase Price: $15 million Depreciation: 5 year, straight line of the full purchase amount Expected Salvage Value: $4 million Yearly lease payment (made at the beginning of the year): $2.8 million Tax rate: 30% Cost of Equity: 9% Cost of Debt: 4.29% Debt/Equity Ratio: 2:1 What is the after-tax cost of debt? 3% 0% 3% 0% What is the WACC? 0% 0% 0% 0% What is the after-tax salvage value? $1.0M $4.0M $1.2M $2.8M At what rate should the after-tax salvage value be discounted? 0% 3% 0% 5% At what rate should the depreciation tax shield cash flow be discounted? 0% 3% 0% 5% What is the PV cost of ownership? $9.6M $9.8M $8.9M $8.7M What is the PV cost of leasing? $9.2M $9.0M $8.5M $8.9M
ABC bought a piece of land in a highly developing area for a purchase price of P4,000,000. Directly attributable costs incurred was P250,000. If ABC were to resell this land now, it would incur cost to sell of P400,000. The following rates were gathered. Weighted average cost of capital 15% Land average price increase per year 18% Inflation rate 4% Required: Assuming that ABC plans to sell the asset by the end of the fifth year, compute the following: 1. Intrinsic value
Explorer Company is considering the following investment proposal: Initial investment: Depreciable assets (straight-line) $28,800 Working capital 3,200 Operations (per year for 4 years): Cash receipts $20,000 Cash expenditures 8,800 Disinvestment: Salvage value of equipment $2,400 Recovery of working capital 3,200 Discount rate: 10 percent Additional information for interest rate of 10 percent and four time periods: Present value of $1 0.68301 Present value of an annuity of $1 3.16987 What is the net present value for the investment? Select one: a. $14,658 b. $35,503 c. $3,825 d. $7,327
Daschle LLC completed some research and development in the US, during June of the current year. The related costs were $72,000. How much amortization may Daschle deduct during the current year Multiple Choice O $0 $8.200 $7,700 $14,400 None of the choices we conect
The company buys an asset that costs $11,200 and returns net cash flow of $160 per month for 3 years, followed by $270 per month for 3 additional years. The company financing rate is 10.9% compounded monthly. Find the asset's annualized internal rate of return and net present value. O The IRR and NPV equal 16.69% and $1,860.86 O The IRR and NPV equal 15.69% and $1,960.86 O The IRR and NPV equal 17.69% and $2,060.86 O The IRR and NPV equal 19.69% and $2,160.86
Gold Inc. sold the rights to use one of its patented processes that will result in cash receipts of $2,500 at the end of each of the next four years and a lump sum receipt of $4,000 at the end of the fifth year. The total present value of these payments if interest is at 9% is: Choose the closest answer. A) $14,000. B) $11,468. C) $12,100. D) $10,699. PVA 9% 4 pds 3.23972, PVA 9% 5 pds 4,58720 PV 1 9% 4 pds .72451 . PV 1 % 5 pds .64993
A warehouse is bought at the capitalization ratio of 8.5% for $1,000,000. The buyer used a 65% LTV loan with 6% interest amortized over 15 years, with monthly payments. What is the expected before-tax cash flow for the first year of operations? $19,179 $5,485 Impossible to answer the question from the information provided. $65,821 $85,000
The retained earnings of XYZ Corporation is P5,000,000 and its liquidated capital P1,000,000 as of the January 1, 2021. During the year, it extracted 5,000 tons of ore but sold 5,200. The ending inventory is 300 tons. The depletion rate of its wasting asset is P250 per ton. It earned a net income of P1,500,000 during the year but declared P500,000 of dividends. How much is the maximum amount that XYZ Corporation can declare as dividends if the accumulated depletion as of year-end is P2,250,000?