In January 2007, the Status Quo Company was formed. Total assets were $547,000, of which $381,000...
In January 2007, the Status Quo Company was formed. Total assets
were $547,000, of which $381,000 consisted of depreciable fixed
assets. Status Quo uses straight-line depreciation of $38,100 per
year, and in 2007 it estimated its fixed assets to have useful
lives of 10 years. Aftertax income has been $57,000 per year for
each of the last 10 years. Other assets have not changed since
2007.
a. Compute return on assets at year-end for
2007, 2009, 2012, 2014, and 2016. (Use $57,000 in the numerator for
each year.) (Input your answers as a percent rounded to 2
decimal places.)
b. To what do you attribute the phenomenon
shown in part a?
| Increase in market share | |
| Annual depreciation charges | |
| Increase in current assets |
c. Now assume income increased by 10 percent
each year. What effect would this have on your answers to part
a?
Homework Answers
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In January 2007, the Status Quo Company was formed. Total assets were $547,000, of which $381,000...
In January 2007, the Status Quo Company was formed. Total assets were $547,000, of which $381,000...
In January 2007, the Status Quo Company was formed. Total assets were $547,000, of which $381,000 consisted of depreciable fixed assets. Status Quo uses straight-line depreciation of $38,100 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $57,000 per year for each of the last 10 years. Other assets have not changed since 2007 Compute return on assets at year-end for 2007, 2009, 2012, 2014, and 2016. (Use...
In January 2007. the Status Quo Company was formed Total assets were $556 000, of which...
In January 2007. the Status Quo Company was formed Total assets were $556 000, of which $385.000 consisted of depreciable fixed assets. Status Quo Usos straight line depreciation of $38.500 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $28.000 per year for each of the last 10 years. Other assets have not changed since 2007 a. Compute return on assets a year end for 2007, 2009, 2012....
In January 2007 the Status Quo Company was formed Total assets were $556000, of which $385.000...
In January 2007 the Status Quo Company was formed Total assets were $556000, of which $385.000 consisted of depreciable foxed assets. Status Quo uses straight-line depreciation of $38.500 per year, and in 2007 it estimated ts foxed assets to have useful lives of 10 years Aftertax income has been $28,000 per year for each of the last 10 years. Other assets have not changed since 2007 a. Compute return on assets at year-end for 2007, 2009, 2012, 2014 and 2016....
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission...
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2007 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2007 financial statements based on this new information. How would the new depreciation assumption statements? a. b. affect...
mancial institution has the following market value balance sheet structure: Assets Cash Bond Total assets Liabilities...
mancial institution has the following market value balance sheet structure: Assets Cash Bond Total assets Liabilities and Equity $ 1,000 Certificate of deposit $10,000 10,000 Equity 1,000 $11,000 Total liabilities and equity $11,000 . The bond has a 10-year maturity, a fixed-rate coupon of 10 percent paid at the end of each year, and a par value of $10,000. The certificate of deposit has a 1-year maturity and a 6 percent fixed rate of interest. The Flexpects no additional asset...
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a rema
Pirate Corporation purchased 100 percent ownership of Ship Company on January 1, 20X5, for $277,000. On that date, the book value of Ship’s reported net assets was $209,000. The excess over book value paid is attributable to depreciable assets with a remaining useful life of 5 years. Net income and dividend payments of Ship in the following periods were as shown below: YearNet IncomeDividends20X5$37,000$18,00020X657,00028,00020X737,00048,000Required:Prepare journal entries on Pirate Corporation’s books relating to its investment in Ship Company for each of the...
A financial institution has the following market value balance sheet structure: Assets Cash Bond Total assets...
A financial institution has the following market value balance sheet structure: Assets Cash Bond Total assets Liabilities and Equity $ 1,900 Certificate of deposit 10.300 Equity $12,200 Total liabilities and equity $10,900 1,300 $12,200 a. The bond has a 10-year maturity, a fixed-rate coupon of 11 percent paid at the end of each year, and a par value of $10,300. The certificate of deposit has a 1-year maturity and a 5 percent fixed rate of interest. The Fl expects no...
The Ste. Marie Division of Pacific Media Corporation just started operations. It purchased depreciable assets costing...
The
Ste. Marie Division of Pacific Media Corporation just started
operations. It purchased depreciable assets costing $45million and
having a four-year expected life, after which the assets can be
salvaged for $9 million. In addition, the division has $45 million
in assets that are not depreciable. After four years, the division
will have $45 million available from these nondepreciable assets.
This means that the division has invested $90 million in assets
with a salvage value of $54 million.Annual depreciation is...
The MacCauley Company has sales of $200 million and total operating expenses (excluding depreciation) of $130 million. Straight-line depreciation on the company's assets is $15 million over 4 year...
The MacCauley Company has sales of $200 million and total operating expenses (excluding depreciation) of $130 million. Straight-line depreciation on the company's assets is $15 million over 4 years. The Upfront Cost equals to the total depreciable value on the company’s assets. Assume that all taxable income is taxed at 30 percent. Assume also that net operating working is 3% of sales in each year. Calculate the MacCauley Company's WACC using 4% cost of debt, 12% cost of equity. There...
On January 1 2007, Wheeley Company issued common shares with a par value of $20,000 and...
On January 1 2007, Wheeley Company issued common shares with a
par value of $20,000 and a market value of $172,000 in exchange for
40 percent ownership of Twain Company. Balance sheet information
reported by Twain on that date is given below:
Twain reported net income of $56,000 and paid dividends of $25,000
during the year. Wheeley uses the equity method of accounting. The
estimated economic life of the patents held by Twain is 8 years.
The buildings and equipment...
In January 2007. the Status Quo Company was formed Total assets were $556 000, of which $385.000 consisted of depreciable fixed assets. Status Quo Usos straight line depreciation of $38.500 per year, and in 2007 it estimated its fixed assets to have useful lives of 10 years. Aftertax income has been $28.000 per year for each of the last 10 years. Other assets have not changed since 2007 a. Compute return on assets a year end for 2007, 2009, 2012....
In January 2007 the Status Quo Company was formed Total assets were $556000, of which $385.000 consisted of depreciable foxed assets. Status Quo uses straight-line depreciation of $38.500 per year, and in 2007 it estimated ts foxed assets to have useful lives of 10 years Aftertax income has been $28,000 per year for each of the last 10 years. Other assets have not changed since 2007 a. Compute return on assets at year-end for 2007, 2009, 2012, 2014 and 2016....
34. Assume that Pappas Company commenced operations on January 1, 2007, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 15 years, but in December 2007 management realized that the assets would last for only 10 years. The firm's accountants plan to report the 2007 financial statements based on this new information. How would the new depreciation assumption statements? a. b. affect...
mancial institution has the following market value balance sheet structure: Assets Cash Bond Total assets Liabilities and Equity $ 1,000 Certificate of deposit $10,000 10,000 Equity 1,000 $11,000 Total liabilities and equity $11,000 . The bond has a 10-year maturity, a fixed-rate coupon of 10 percent paid at the end of each year, and a par value of $10,000. The certificate of deposit has a 1-year maturity and a 6 percent fixed rate of interest. The Flexpects no additional asset...
A financial institution has the following market value balance sheet structure: Assets Cash Bond Total assets Liabilities and Equity $ 1,900 Certificate of deposit 10.300 Equity $12,200 Total liabilities and equity $10,900 1,300 $12,200 a. The bond has a 10-year maturity, a fixed-rate coupon of 11 percent paid at the end of each year, and a par value of $10,300. The certificate of deposit has a 1-year maturity and a 5 percent fixed rate of interest. The Fl expects no...
The
Ste. Marie Division of Pacific Media Corporation just started
operations. It purchased depreciable assets costing $45million and
having a four-year expected life, after which the assets can be
salvaged for $9 million. In addition, the division has $45 million
in assets that are not depreciable. After four years, the division
will have $45 million available from these nondepreciable assets.
This means that the division has invested $90 million in assets
with a salvage value of $54 million.Annual depreciation is...
On January 1 2007, Wheeley Company issued common shares with a
par value of $20,000 and a market value of $172,000 in exchange for
40 percent ownership of Twain Company. Balance sheet information
reported by Twain on that date is given below:
Twain reported net income of $56,000 and paid dividends of $25,000
during the year. Wheeley uses the equity method of accounting. The
estimated economic life of the patents held by Twain is 8 years.
The buildings and equipment...
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