The Newburg Flyers operate a major sports franchise from a building in downtown Newburg.The building was built in 1940 at a cost of $5 million and is fully depreciated so that it isshown on the company's balance sheet at a nominal value of $1.The land on which the building was built in 1940 was purchased in 1935 for $10,000 and isvalued at this amount for balance sheet purposes. The franchise, which is the company'sonly other major investment, cost $100,000 in 1940. Following GAAP at the time of the purchase,the franchise cost has now been fully amortized.The current assessed value of the building is $200,000. The assessed value of the land, whichis located in a prime urban area, is $20 million and reflects the net value of the propertyif the current building is demolished and replaced with an office and shopping complex. Thecurrent value of the franchise, assuming that the league owners would approve a franchisesale, is $50 million.a) Ignoring taxes in this calculation, if the team earns an income of approximately $3million per year, what is the return on investment using the following as the measure ofthe investment? Enter ROIs as percentages, no decimals.i) net book value 0ii) historical cost 59× %%b) Ignoring taxes in this calculation and assuming that the organization's cost of capital is 15%,if the team team earns approximately $3 million per year, what is the residual income usingthe following as the measure of the investment? Round answer to the nearest dollar.i) net book value? $ 0ii) historical cost? $ 0×

It is a financial ratio used to analyse the financial statements with respect to the profitability…

Answered: The Newburg Flyers operate a major…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Brix Co owns a building which it uses as its office, warehouse and garage. The land is carried as a separate non-current tangible asset in the statement of financial position. Brix Co has a policy of regularly revaluing its tangible non-current assets. The original cost of the building on 1 January 2006 was $2.1 million, and at that date it was estimated to have a useful economic life of 20 years, with no residual value. The company adopted the revaluation model of IAS 16 in 2012 and the building was valued at subsequent valuations as follows: 31 December 2012 $2.6 million 31 December 2015 $2.4million At each revaluation date the remaining useful life remains unchanged. Brix Co also owns a brand name, which it acquired 1 January 2014 for $1 million. The brand name is being amortised over 10 years and has a carrying amount at 31 December 2015 of $800,000. A brand specialist valued Miami's brand name at market value of $780,000 on the same date and Miami's chief accountant calculated…
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Below are transactions related to Martinez Company. The City of Pebble Beach gives the company 5 acres of land as a plant site. The fair value of this land is determined to be $87,350. (a) 13,000 shares of common stock with a par value of $55 per share are issued in exchange for land and buildings. The property has been appraised at a fair value of $873,500, of which $175,190 has been allocated to land and $698,310 to buildings. The stock of Martinez Company is not listed on any exchange, but a block of 100 shares was sold by a stockholder 12 months ago at $71 per share, and a block of 200 shares was sold by another stockholder 18 months ago at $63 per share. (b) (c) No entry has been made to remove from the accounts for Materials, Direct Labor, and Overhead the amounts properly chargeable to plant asset accounts for machinery constructed during the year. The following information is given relative to costs of the machinery constructed. Materials used $11,300 Factory supplies used 846…

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