Market vs Book Value: The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology. He then formed a corporation and invested $200,000 in setting up a production plant. He believes that he could sell his patent for $50 million.
a. What are the book value and market value of the firm?
b. If there are 2 million shares of stock in the new corporation, what would be the price per share and the book value per share?
Click here for the solution: The founder of Alchemy Products, Inc., discovered a way to turn lead into gold and patented this new technology
Showing posts with label way. Show all posts
Showing posts with label way. Show all posts
Tuesday, April 12, 2016
Monday, October 26, 2015
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
Analysis Case 20-10 Various changes
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method to the straight-line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2011, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared.
Required:
1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific.
2. Why should companies disclose changes in accounting principles?
Click here for the solution: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method to the straight-line method beginning January 1, 2011. DRS also changed its estimated residual value used in computing depreciation for its office building. At the end of 2011, DRS changed the specific subsidiaries constituting the group of companies for which its consolidated financial statements are prepared.
Required:
1. For each accounting change DRS undertook, indicate the type of change and how DRS should report the change. Be specific.
2. Why should companies disclose changes in accounting principles?
Click here for the solution: DRS Corporation changed the way it depreciates its computers from the sum-of-the-year's-digits method
Wednesday, October 14, 2015
Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011.
1. Commercial paper.
2. Noncommitted line of credit.
3. Customer advances.
4. Estimated warranty cost.
5. Accounts payable.
6. Long-term bonds that will be callable by the creditor in ther upcoming year unless an existing violation is not corrected (there is a reasonable possibility the violation will be corrected within the grace period).
7. Note due March 3, 2012.
8. Interest accrued on note, Dec. 31, 2011.
9. Short-term bank loan to be paid with proceeds of sale of common stock.
10. A determinable gain that is contingent on a future event that appears extremely likely to occur in three months.
11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months.
12. Unasserted assessment of back taxes with a reasonable possibility of being asserted, in which case there would probably be a loss in 13 months.
13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months.
14. Bond sinking fund.
15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called.
Click here for the solution: Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
1. Commercial paper.
2. Noncommitted line of credit.
3. Customer advances.
4. Estimated warranty cost.
5. Accounts payable.
6. Long-term bonds that will be callable by the creditor in ther upcoming year unless an existing violation is not corrected (there is a reasonable possibility the violation will be corrected within the grace period).
7. Note due March 3, 2012.
8. Interest accrued on note, Dec. 31, 2011.
9. Short-term bank loan to be paid with proceeds of sale of common stock.
10. A determinable gain that is contingent on a future event that appears extremely likely to occur in three months.
11. Unasserted assessment of back taxes that probably will be asserted, in which case there would probably be a loss in six months.
12. Unasserted assessment of back taxes with a reasonable possibility of being asserted, in which case there would probably be a loss in 13 months.
13. A determinable loss from a past event that is contingent on a future event that appears extremely likely to occur in three months.
14. Bond sinking fund.
15. Long-term bonds callable by the creditor in the upcoming year that are not expected to be called.
Click here for the solution: Indicate (by letter) the way each of the items listed below should be reported in a balance sheet at December 31, 2011
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