Sanderson Corporation acquired 70 percent of Kline Corporation’s common stock on January 1, 20X7, for $294,000 in cash. At the acquisition date, the book values and fair values of Kline’s assets and liabilities were equal, and the fair value of the noncontrolling interest was equal to 30 percent of the total Book value of Kline. The stockholders’ Equity accounts of the two companies at the date of purchase are:
Required a. What amount will be assigned to the noncontrolling interest on January 1, 20X7, in the consolidated Balance Sheet? b. Prepare the stockholders’ equity section of Sanderson and Kline’s consolidated balance sheet as of January 1, 20X7. c. Sanderson acquired ownership of Kline to ensure a constant supply of electronic switches, which it purchases regularly from Kline. Why might Sanderson not feel compelled to purchase all of Kline’s shares?
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Sanderson Kline Corporation Corporation Common Stock ($10 par value) Additional Paid-In Capital Retained Earnings $400,000 222,000 358,000 $180,000 65,000 175,000 Total Stockholders' Equity $980,000 $420,000
Sandra Kristof sells furniture for McKinney Furniture Company. Kristof is having financial problems and takes $650 that she received from a customer. She rang up the sale through the cash register. What will alert Megan McKinney, the controller, that something is wrong?
Sandra Menefee sued Geographic Expeditions, Inc. (GeoEx), for the wrongful death of her son while on a GeoEx expedition up Mount Kilimanjaro. GeoEx moved to compel arbitration under the parties’ limitation of liability contract. GeoEx designed its arbi- tration clause to limit the plaintiffs’ recovery and required them to indemnify GeoEx for its legal costs and fees if they unsuccessfully pursued any claim covered by the release agreement. Moreover, GeoEx required that plaintiffs pay half of any mediation fees and arbitrate in San Francisco, GeoEx ’ s choice of venue, as opposed to the plaintiffs ’ home in Color- ado. Should the court require the Menefees to arbitrate? If any component of the arbitration clause is found to be unconscionable, should the court simply sever the objectionable provision and enforce the remainder of the arbitration clause? [Lhotka v. Geo- graphic Expeditions, Inc., 104 Cal. Rptr. 3d 844 (Cal. App. 2010)]
Sandy Corp. projects that it will have taxable income of $150,000 for the year before paying any fringe benefits. Assume Karen, Sandy’s sole shareholder, has a marginal tax rate of 35 percent on ordinary income and 15 percent on dividend income. Assume Sandy’s tax rate is 35 percent. a. What is the amount of the overall tax (corporate level + shareholder level) on Sandy’s $150,000 of pre-benefit income if Sandy Corp. does not pay out any fringe benefits and distributes all of its after-tax earnings to Karen (ignore the net investment income tax)? b. What is the amount of the overall tax on Sandy’s $150,000 of pre-benefit income if Sandy Corp. pays Karen’s adoption expenses of $10,000 and the payment is considered to be a nontaxable fringe benefit (ignore the net investment income tax)? Sandy Corp. distributes all of its after-tax earnings to Karen. c. What is the amount of the overall tax on Sandy’s $150,000 of pre-benefit income if Sandy Corp. pays Karen’s adoption expenses of $10,000 and the payment is considered to be a taxable fringe benefit (ignore the net investment income tax and the additional Medicare tax)? Sandy Corp. distributes all of its after-tax earnings to Karen.
Sandy Kupchack just graduated from State University with a bachelor’s degree in history. During her four years at the university, Sandy accumulated $12,000 in student loans. She asks for your help in determining the amount of the quarterly loan payment. She tells you that the loan must be paid back in five years and that the annual interest rate is 8%. Payments begin in three months. Required: Determine Sandy’s quarterly loan payment.
Santa Corporation sold a $1,000 Bond on January 1, 2011. The bond specified an interest rate of 6 percent payable at the end of each year. The bond matures at the end of 2013. It was sold at a market rate of 8 percent per year. The following spreadsheet was completed:
Required: 1. What was the bond’s issue price? 2. Did the bond sell at a discount or a premium? How much was the premium or discount? 3. What amount of cash was paid each year for bond interest? 4. What amount of interest expense should be shown each year on the Income Statement? 5. What amount(s) should be shown on the Balance Sheet for bonds payable at each year-end? (For year 2013, show the balance just before retirement of the bond.) 6. What method of Amortization was used? 7. Show how the following amounts were computed for year 2012: ( a ) $60, ( b ) $77, ( c ) $17, and ( d ) $981. 8. Is the method of amortization that was used preferable? Explain.
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Cash Paid Interest Expense Amortization Balance January 1, 2011 End of year 2011 End of year 2012 End of year 2013 $ 948 $60 $76 $16 964 60 77 17 981 60 79 19 1,000
Santa Cruz Bottling is a manufacturer of organic soft drinks on the coast of central California. Its products are enjoying a growing reputation and increased demand throughout the American Southwest. Because of the high cost of transporting soft drinks, it is considering a new plant to serve the states of New Mexico and Arizona. A key concern in its search for a new location is the resultant transportation costs to serve its key markets. Following is a list of cities where its main wholesale customers are located, along with estimated annual demand in cases of product for each.
a. Use the centroid method to recommend a location for the new bottling plant. Round your coordinates to one decimal place. b. Do you have any concerns about the result? How would you deal with them?
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City x-coordinate y-coordinate Number of cases 25,000 20,000 Phoenix 250 250 Tucson 350 125 Albuquerque Santa Fe 800 450 28,000 17,000 850 520
Santa Monica adopted a rent control ordinance authorizing the Rent Control Board to set the amount of rents that could be charged. At a hearing before it, the board determined that McHugh was charging his tenants a rent higher than the maximum allowed. McHugh claimed that the action of the board was improper because there was no jury trial. Is McHugh correct? Why or why not? [ McHugh v. Santa Monica Rent Control Board , 777 P.2d 911 (Cal.)]
Sante Fe Corporation’s sales office and manufacturing plant are located in State A. Sante Fe also maintains a manufacturing plant and sales office in State B. For purposes of apportionment, State A defines payroll as all compensation paid to employees, including contributions to § 401(k) deferred compensation plans. Under the statutes of State B, neither compensation paid to officers nor contributions to § 401(k) plans are included in the payroll factor. Sante Fe incurred the following personnel costs.
What is the payroll factor for: a. State A? b. State B?
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State A State B Total Wages and salaries for employees other than officers Salaries for officers $ 60,000 40,000 $40,000 $100,000 20,000 60,000 Contributions to 5 401(k) plans 20,000 10,000 $70,000 30,000 Total $120,000 $190,000