Vanderheiden Herrenhouse Press Publishing $ 100,000 $ 80,000 Current assets 120,000 $ 200,000 Fixed assets (net) 100,000 Total assets $ 200,000 $ 20,000 $ 80,000 Short-term debt Long-term debt 80,000 20,000 Common stock 50,000 50,000 Retained earnings 50,000 $ 200,000 50,000 Total liabilities and equity $ 200,000
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Vanderheiden Press Inc. and Herrenhouse Publishing
Company had the following balance sheets as of December 31, 2018 (thousands of dollars):
Earnings before interest and taxes for both firms are $30 million, and the effective federalplus-
state tax rate is 40%.
a. What is the
and the rate on long-term debt is 13%?
b. Assume that the short-term rate rises to 20%. Although the rate on new long-term debt
rises to 16%, the rate on existing long-term debt remains unchanged. What would be
the returns on equity for Vanderheiden Press and Herrenhouse Publishing under these
conditions?
c. Which company is in a riskier position? Why?
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- Brief ExerciseRatio Analysis Valiant Corporation has $1,800,000 in total liabilities, $800,000 of which arc current. Valiant has $400,000 of cash and cash equivalents, $300,000 of other current assets, and $2,000,000 in property, plant, and equipment. Required: Calculate Valiants debt to equity ratio.Current Assets P 1,375,000Property, plant and equipment 3,375,000Other non-current assets 500,000Total Assets P 5,250,000 Liabilities and Shareholders’ equity Total liabilities P 1,500,000Ordinary shares, P10 par value 4,000,000Additional paid in capital 750,000Deficit (1,000,000)Total liabilities and equity P 5,250,000The stockholders and creditors approved the quasi reorganization effective July 1,2011, to be accomplishedby a reduction in property, plant and equipment (net) P 875,000, a reduction in other non-current assets ofP375,000, and a reduction in par value from P10 to P51. Logan’s July 1 balan ce sheet after the quasi-reorganization should show total assets ofa. P 4,000,000b. P 2,500,000c. P 4,375,000d. P 3,875,0002. The balance in additional paid in capital after the quasi-reorganization on July 1 is:a. P 750,000b. P 2,000,000c. P 500,000d. P-0-3. Logan’s deficit after the quasi -reorganization on July 1,2011 should be:a. P 750,000b. P 250,000c.…Patel Corporation Balance Sheet December 31, 2021 $ 630,000 189,000 275,000 1,875,000 Cash $ Accounts receivable ( net) Inventories Plant and equipment net of depreciation Patents Other intangible assets Total Assets $ 750,000 350,000 Accounts payable 1.950,000 Income taxes payable 2,439,000 Miscellaneous accrued payables Bonds payable (8% , due 2023) 1,963,000 Preferred slock ($100 par, 6% 261,000 cumulative nonparticipating) 75,000 Common stock (no par, 60,000 7,058.000 shares authorized, issued and outstanding) Retained earnings Treasury stock- - 1.500 shares of preferred Total Equities 1,125,000 2,439,000 (225,000) underline 5 7,058,000 Patel Corporation Income Statement Year ended December 31, 2021 Net sales $ Cose goods sold Gross profit Operating expenses (including bond interest expense) Income before income taxes Income tax Net income 9,000,000 6,000,000 3,000,000 1,500,000 1,500,000 450,000 1, 05 Additional information: There are no preferred dividends in arrears, the…
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- Orbit Limited : Statement of Financial Position as at 31 December 2022 2021 Non-current Assets R11 810 000 R7 560 000 Property, Plant, Equipment R10 025 000 R6 250 000 Investments R1 785 000 R1 310 000 Current Assets R4 190 000 R4 690 000 Inventories R 1 875 000 R2 350 000 Account Receivable R1 925 000 R2 200 000 Cash R390 000 R140 000 Toatal Assets R16 000 000 R12 250 000 Equities & Liabilities Equity ? ? Oridanary share capital R5 480 000 R3 680 000 Retained earnings ? ? Non-current Liabilities R4 500 000 R3 800 000 Loan (20% p.a) R4 500 000 R3 800 000 Current Liabilities R2 300 000 R1 500 000 Accounts payable? R2 300 000 R1 500 000 Calculate the increase in the retained earnings over the two-year period.Company A Company B Total Assets 250 million 300 million Debt (10%) 50 million 180 million Equity 200 million 120 million Calculate ROE of Company A and Company B when ROA for both of them is12% and 6% respectivelyPip’s Paw Patrol had the following account Balances on Dec 31, 2021:BOOK Value FMVCurrent Assets $225,000 $250,000Land $320,000 $350,000Building $450,000 $650,000Accum Dep ($50,000)Equipment $195,000 $50,000Accum Dep ($100,000)Current Liabilities ($75,000) ($75,000)Bonds Payable ($200,000) ($300,000)Common Stock ($65,000)Paid in Capital ($700,000)Pip’s industry anticipates an 8% return on investments of P/E/P before accumulated depreciation andPip generated a $120,000 profit in 2021. Pip would like to be paid for 4 years of excess earnings.REQUIRED:a. Calculate the Goodwillb. Calculate the pricec. Record the purchase of the Pip Paw Patrol on the books of the BUYER, assume they issued100,000 shares of $2 par value common stock and paid $40,000 in legal and accounting fees and$50,000 in stock issuance costs to their broker.d. Record the sale of the company on the books of the seller.
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