Advanced financial accounting


Question #1: Tree, Inc., has held a 10 percent interest in the stock of Limb Company for several years. Because of the level of ownership, this investment has been accounted for using the fair- value method. At the beginning of the current year, Tree acquires an additional 70 percent interest, which provides the company with control over Limb. In preparing consolidated financial statements for this business combination, how does Tree account for the previous 10 percent ownership interest
Question Two: Franklin, Inc. owns 80% of Prevatt Company. During the current year, a portion of the investment in Prevatt is sold. Prior to recording the sale, Franklin adjusts the book value of its investment. What is the purpose of the adjustment?

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Accounting Principles

1. Assume that a nursing home balance sheet shows total assets of $20 million and total liabilities of $17 million. Can the fund balance be determined with any degree of certainty? Why or why not? If so, what is it?
2. On June 30, payroll of $10,000 was paid to the organization's employees. What accounts would probably be affected by the journal entry on that date? On July 5, it was noted that $2000 of labor was charged to the nursing department in error and should have been charged to radiology. Should the organization bother making a journal entry to correct the error? Why or why not?
3. Why is accounting important for health care organizations?
4. Is it appropriate for health care organizations to make a profit?
5. Is it reasonable to assume that the numbers reported on financial statements will be precisely accurate?
6.Why is there a strong focus on liquid assets?
7. Who can restrict the use of the organization's assets? Who can remove restrictions?

8. What is the difference between charity care and a bad debt?

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Managerial Economics

1. Southwest airlines begins a “Bags Fly Free” campaign, charging no fees for a first and second checked bag. Does this situation best represent producer-producer rivalry, consumer-consumer rivalry or consumer-producer rivalry? Explain
2. What is the maximum amount you would pay for an asset that generates an income of $250,000 at the end of each five years if the opportunity cost of using funds is 8 percent?
3. Suppose that the total benefit and total cost from a continuous activity are respectively given by the following equations: B(Q)=76+24Q-2Q2 and C(Q)=60+6Q [note: MB(Q)=24-4Q and MC (Q)=6]
a.       Write out the equations for the net benefits
b.       What are the net benefits when Q=2? And Q =4?
c.       Write out the equations for the marginal net benefits
d.    What are the marginal benefits when Q=2 and Q=4?
e.     What level of Q maximizes net benefits?
f.       At the value of Q that maximizes net benefits, what is the value of marginal net benefits?
1     4 A firms current profits are $400,000. These profits are expected to grow indefinitely at a constant annual rate of 4%. If the firms’ opportunity cost of funds is 6%. Determine the value of the firm
a.       The instant before it pays out current profits and dividends
b.       The instant after it pays out current profits and dividends
5.   What is the value of a preferred stock that pays a perpetual divided of $125 at the ends of each year when the interest rate is 5%

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