Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN: 9781305970663
Author: Don R. Hansen, Maryanne M. Mowen
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 19E
1.
To determine
Compute the value of the option to each executive.
2.
To determine
Discuss the advantages and disadvantages of Incorporation F’s stock option plan.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
On January 1, 2020, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Inc., for $4,400,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:
Carrying Amount
Fair Value
Cash and receivables
$
195,000
$
195,000
Computing equipment
5,765,000
7,060,000
Patented technology
185,000
4,170,000
Trademark
235,000
2,170,000
Liabilities
(270,000
)
(270,000
)
Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…
On January 1, 2020, Ridge Road Company acquired 20 percent of the voting shares of Sauk Trail, Inc., for $2,700,000 in cash. Both
companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to
gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road
quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and
investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow:
Cash and Receivables
Computing Equipment
Patented Technology
Trademark
Liabilities
2020
2021
Carrying Amount
$ 110,000
5,000,000
100,000
150,000
(185,000)
Net Income
$1,800,000
1,985,000
Also, as of January 1, 2020. Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented
technology was…
On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $4,300,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities.
The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow:
Carrying Amount
Fair Value
Cash and receivables
$
190,000
$
190,000
Computing equipment
5,720,000
6,980,000
Patented technology
180,000
4,160,000
Trademark
230,000
2,160,000
Liabilities
(265,000
)
(265,000
)
Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…
Chapter 10 Solutions
Cornerstones of Cost Management (Cornerstones Series)
Ch. 10 - Prob. 1DQCh. 10 - Explain why firms choose to decentralize.Ch. 10 - Explain how access to local information can...Ch. 10 - What are margin and turnover? Explain how these...Ch. 10 - What are the three benefits of ROI? Explain how...Ch. 10 - What are two disadvantages of ROI? Explain how...Ch. 10 - What is residual income? Explain how residual...Ch. 10 - Prob. 8DQCh. 10 - Prob. 9DQCh. 10 - What is a transfer price?
Ch. 10 - Prob. 11DQCh. 10 - If the minimum transfer price of the selling...Ch. 10 - If an outside, perfectly competitive market exists...Ch. 10 - Prob. 14DQCh. 10 - Prob. 15DQCh. 10 - Forchen, Inc., provided the following information...Ch. 10 - Refer to Cornerstone Exercise 10.1. Forchen, Inc.,...Ch. 10 - Ignacio, Inc., had after-tax operating income last...Ch. 10 - Prob. 4CECh. 10 - Prob. 5CECh. 10 - Prob. 6CECh. 10 - Jarriot, Inc., presented two years of data for its...Ch. 10 - Refer to Exercise 10.7 for data. At the end of...Ch. 10 - Refer to the data given in Exercise 10.8....Ch. 10 - Brewster Company manufactures elderberry wine....Ch. 10 - Xenold, Inc., manufactures and sells cooktops and...Ch. 10 - Prob. 12ECh. 10 - Jocassee Furniture Manufacturing, Inc., has a...Ch. 10 - Prob. 14ECh. 10 - Mossfort, Inc., has a division in Canada that...Ch. 10 - A multinational corporation has a number of...Ch. 10 - Consider the data for each of the following four...Ch. 10 - The following selected data pertain to the Argent...Ch. 10 - Prob. 19ECh. 10 - The key difference between residual income and EVA...Ch. 10 - If sales and average operating assets for Year 2...Ch. 10 - Prob. 22ECh. 10 - Refer to 10.22. If the imputed interest rate is...Ch. 10 - A company had WACC (weighted average cost of...Ch. 10 - Prob. 25PCh. 10 - Raddington Industries produces tool and die...Ch. 10 - Prob. 27PCh. 10 - Prob. 28PCh. 10 - Oriole, Inc., owns a number of food service...Ch. 10 - Prob. 30PCh. 10 - Prob. 31PCh. 10 - Renslen, Inc., a truck manufacturing conglomerate,...Ch. 10 - Jump Start Company (JSC), a subsidiary of Mason...Ch. 10 - Prob. 34PCh. 10 - Grate Care Company specializes in producing...
Knowledge Booster
Similar questions
- On January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Cash and receivables Computing equipment Patented technology Trademark Liabilities 2020 2021 Also, as of January 1, 2020, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was estimated to have a four-year remaining useful life. The trademark's useful life was considered…arrow_forwardOn January 1, 2020, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Inc., for $3,700,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail’s board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail’s board, which gave it the ability to significantly influence Sauk Trail’s operating and investing activities. The January 1, 2020, carrying amounts and corresponding fair values for Sauk Trail’s assets and liabilities follow: Carrying Amount Fair Value Cash and receivables $ 160,000 $ 160,000 Computing equipment 5,450,000 6,500,000 Patented technology 150,000 4,100,000 Trademark 200,000 2,100,000 Liabilities (235,000 ) (235,000 ) Also, as of January 1, 2020, Sauk Trail’s computing equipment had a…arrow_forwardOn January 1, 2023, Ridge Road Company acquired 30 percent of the voting shares of Sauk Trail, Incorporated, for $4,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different industries. Ridge Road made the investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and investing activities. The January 1, 2023, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Carrying Amount $ 200,000 5,810,000 Fair Value $ 200,000 7,140,000 4,180,000 2,180,000 (275,000) Assets and Liabilities Cash and Receivables Computing Equipment Patented Technology Trademark Liabilities Also, as of January 1, 2023, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented…arrow_forward
- On January 1, 2023, Ridge Road Company acquired 25 percent of the voting shares of Sauk Trail, Incorporated, for $3,500,000 in cash. Both companies provide commercial Internet support services but serve markets in different Industries. Ridge Road made the Investment to gain access to Sauk Trail's board of directors and thus facilitate future cooperative agreements between the two firms. Ridge Road quickly obtained several seats on Sauk Trail's board, which gave it the ability to significantly influence Sauk Trail's operating and Investing activities. The January 1, 2023, carrying amounts and corresponding fair values for Sauk Trail's assets and liabilities follow: Assets and Liabilities Cash and Receivables Computing Equipment Patented Technology Trademark Carrying Amount $ 150,000 5,360,000 Fair Value $ 150,000 Liabilities Years 2023 2024 Also, as of January 1, 2023, Sauk Trail's computing equipment had a seven-year remaining estimated useful life. The patented technology was…arrow_forwardOn January 1, 2024, Cullumber Company, a public company, purchased 40% of the common shares of Triple Titanium Inc. for $575,000. The remaining shares (60%) are held by the family members of the company's founder. Cullumber considers this a strategic investment and a critical step into developing consumer markets. Triple Titanium is currently a supplier to Cullumber. Cullumber placed two members on Triple Titanium's 10-person board of directors and the two members believe they have been influential on the board through the year. Cullumber and Triple Titanium both have December 31 year ends. During 2024, Triple Titanium reported profit of $240,000 and paid total dividends of $60,000. (b) Prepare the following journal entries for Cullumber, assuming significant influence does exist. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all…arrow_forwardThe owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2021. In addition, J&K Paint Shop Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information. a. Issued 40% shares of class A common stock. Stock has par value of $45 per share and was issued at $62 per share. b. Issued 40% shares of no-par class B stock. (Issue price is at $60.00) C. Issued 30% shares of preferred stock at par value (Par value - $125). d. Exchanged 40% shares of class A common stock for Office Furniture and…arrow_forward
- The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2021. In addition, J&K Paint Shop Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information. Issued 60%shares of class A common stock. Stock has par value of $48.00 per share and was issued at $105.00 per share. (Please refer to table below and use only the info in line with your first name initial in the blank/underlined space). Issued 60%shares of no-par class B stock. Issue Price $98.00 Issued 20%shares of preferred stock at…arrow_forwardThe owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2021. In addition, J&K Paint Shop Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information . Issued 40% of authorized shares of class A common stock. Stock has par value of $45 per share and was issued at $62 per share. Issued at $60, 40% of authorized shares of no-par class B stock. Issued 30% of authorized shares of preferred stock at par value $125. Exchanged 40% of authorized shares of class A common stock for Office…arrow_forwardThe owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. They have asked each student from your accounting course to prepare the company’s journal entries and statement of owner’s equity based on the following information which is grouped according to your first name initial. (Hint!!!! Example first Manuel will use the initial M and that person should only use the info presented in line with the heading with their first name initial. You are not allowed to use info associated other initials other than that of your own as this will result in the…arrow_forward
- The owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. Issued 30% of authorised shares of class A common stock. Stock has par value of $20.00 per share and was issued at $28.00 per share. Issued 30% of authorised shares of no-par class B stock at $25.00. Issued 50% of authorised shares of preferred stock at par value $110.00. Exchanged 50% of authorised shares of class A common stock for Office Furniture and Equipment with an appraised value of $ 4,000,000.00 and Motor Truck with an appraised value of $10,000,000.00. Earned Net income 1,500,000.00.…arrow_forwardThe owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $45 par value (see info below), 5% cumulative preferred stock. Aditional Issued 40% shares of class A common stock. Stock has par value of $45.00 per share and was issued at $62 per share Issued 40% shares of no-par class B stock. Issue price $60.00 Issued 30% shares of preferred stock at par value Exchanged 40% of authorized shares of class A common stock for office furniture with an appraised value of $4,000,000 and motor truck with a value of $10,000,000 1. Declared interim dividends for preferred shareholders as well as $.80 per share to…arrow_forwardThe owners are desirous of comparing serval financial transactions and possible outcomes to assist in guiding their decision-making process. They assume that the company will be formed on January 1, 2020. In addition, E&B Comic Bookstore Company’s charter will authorize 1,200,000 shares of common stock (to be divided into two classes (700,000 shares class A -voting rights and 500,000 shares class B -nonvoting rights) and 400,000, $X par value (see info below), 5% cumulative preferred stock. Issued 40% of authorised shares of class A common stock. Stock has par value of $45.00 per share and was issued at $62.00 per share. Issued 40% of authorised shares of no-par class B stock at $60.00. Issued 30% of authorised shares of preferred stock at par value $125.00. Exchanged 40% of authorised shares of class A common stock for Office Furniture and Equipment with an appraised value of $ 4,000,000.00 and Motor Truck with an appraised value of $10,000,000.00. Earned Net income 2,000,000.00.…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser...AccountingISBN:9781305970663Author:Don R. Hansen, Maryanne M. MowenPublisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
Cornerstones of Cost Management (Cornerstones Ser...
Accounting
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Cengage Learning
Managerial Accounting: The Cornerstone of Busines...
Accounting
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Cengage Learning