Reference no: EM131047569
On January 2, 2003, Page Corporation acquired a 90% interest in Salcedo Company for $3,500,000. At that time Salcedo Company had capital stock of $2,250,000 and retained earnings of $1,250,000. The book values of Salcedo Company's assets and liabilities were equal to their fair values except for land and bonds payable. The land had a fair value of $200,000 and a book value of $120,000. The outstanding bonds were issued on January 1, 1998, at 9% and mature on January 1, 2008. The bonds' principal is $500,000 and the current yield rate on similar bonds is 6%.
Required:
Assuming interest is paid annually, prepare a Computation and Allocation Schedule for the difference between cost and book value in the consolidated statements workpaper on the acquisition date.
Prepare the workpaper entries necessary on December 31, 2003, to allocate and depreciate the difference between cost and book value.
|
The investment banking syndicates earn on the sale
: A company wants to raise 500 million in a new stock issue. Its investment banker indicates the sale of new stock will require 8% underpicking and a 7% spread. How much money will the investment banking syndicate's earn on the sale?
|
|
Value of collection is not guaranteed for variety of reasons
: An increase in value of any collection is not guaranteed for a variety of reasons. If you are a collector, please use your own collection to answer the following questions. If you are not a collector, research to find a collection for your answers. a..
|
|
Compute earnings per share before the expansion
: How do you calculate the cost of interest for each plan? The Lopez-Portillo Company has $10.9 million in assets, 90 percent financed by debt, and 10 percent financed by common stock. If EBIT is 7 percent on total assets, compute earnings per share (E..
|
|
Consolidated statements workpaper on acquisition date
: On January 2, 2003, Page Corporation acquired a 90% interest in Salcedo Company for $3,500,000. At that time Salcedo Company had capital stock of $2,250,000 and retained earnings of $1,250,000. Assuming interest is paid annually, prepare a Computatio..
|
|
New plant is expected to generate aftertax cash flows
: Photochronograph Corporation (PC) manufactures time series photographic equipment. It is currently at its target debt-equity ratio of .64. It’s considering building a new $71.9 million manufacturing facility. This new plant is expected to generate af..
|
|
Nominal yield to maturity on this investment
: Assume that you are considering the purchase of a 20-year, noncallable bond with an annual coupon rate of 9.5%. The bond has a face value of $1,000, and it makes semiannual interest payments. If you require an 8.2% nominal yield to maturity on this i..
|
|
Assume inflationary expectations have not changed
: Explain how your business would likely be affected if the central bank of Mexico used indirect intervention by lowering Mexican interest rates (assume inflationary expectations have not changed).
|
|
Compute the present value of net non-recurring investment
: Sancore Inc. decided to invest in a project costing $35,000. It is assumed that all of $8,000 working capital will be recovered at the end of the project, which is four years. The opportunity cost of capital is 10%. Compute the present value of net n..
|