Klon Corporation owns 70 percent of Brant Company's stock and 60 percent of Torkel Company's stock. During 20X8, Klon sold inventory purchased in 20X7 for $100,000 to Brant for$150,000. Brant then sold the inventory at its cost of $150,000 to Torkel. Prior to December 31, 20X8, Torkel sold$90,000 of inventory to a non-affiliate for $120,000 and held$60,000 in inventory at December 31, 20X8.

Required

Give the journal entries recorded by Klon, Brant, and Torkel during 20X8 relating to the inter-corporate sale and resale of inventory.

To secure funding to convert their service vehicle fleet to hybrid technologies. MGL Industries is issuing green bonds to investors. You plan to buy $1 million of these bonds. This is how much you will raise by selling a vacation home that you acquired 25 years ago for$140,000. (a) At What rate has the value of the vacation home increased? (b) Write a short description of green bonds. How are they different from normal corporate, revenue, and debenture bonds? As an investor, would you buy green bonds? Explain.

You had $\$10,000$ to invest. You put $x$ dollars in a safe, government-insured certificate of deposit paying $5\%$ per year. You invested the remainder of the money in noninsured corporate bonds paying $12\%$ per year. Your total interest earned at the end of the year is given by the algebraic expression

$$0.05x + 0.12(10,000 - x).$$

a. Simplify the algebraic expression. b. Use each form of the algebraic expression to determine your total interest earned at the end of the year if you invested $\$6000$ in the safe, government-insured certificate of deposit.

Auditors give a type of certification of corporate fi nancial statements. Certification is used in many other aspects of business as well. For example, it plays a critical role in the sustainability movement. The February 7, 2012, issue of the New York Times contained an article by S. Amanda Caudill entitled “Better Lives in Better Coffee,” which discusses the role of certification in the coffee business.

Instructions
Read the article and answer the question below.

According to the author, which certification is most common among coffee growers? What are the possible reasons for this?

A study of the pay of corporate CEOs (chief executive officers) examined the cash compensation, adjusted for inflation, of the CEOs of 104 corporations over the period 1977 to 1988 . Among the data are the average annual pay increases for each of the 104 CEOs. The mean percent increase in pay was 6.9%. The data showed great variation, with a standard deviation of 17.4%. The distribution was strongly skewed to the right.

What are the degrees of freedom? When the exact degrees of freedom do not appear in Table C, use the next lower degrees of freedom in the table.

The Bellview Corporation had an annual gross income of $834,718 for the year. Business deductions totaled$697,497. What federal corporate income tax must Bellview pay for the year?

$$\begin{array}{r r |r r r} \text{If taxable income is:} & & & \text{Tax is:}\\ \hline \text{Over-} & \text{But not over-} & & & \text{Of the amount over-}\\ 0 & 50,000 & & 15\% & 0\\ \$50,000 & \$75,000 & \$7500 & +25\% & \$50,000\\ 75,000 & 100,000 & 13,250 & +34\% & 75,000\\ 100,000 & - & 21,750 & +39\% & 100,000\\ \end{array}$$

The CEO of the Consolidated Hands of Help, a nonprofit New York Corporation, was shown to be using corporate funds to maintain several limos and various houses for himself around the country. He responded that he needed these to enable him to better recruit donors. The board of directors agreed with his position. A shareholder brought suit claiming that more than 12,000 homeless people could be helped for what was being paid for the luxury items. The suit sought to recover the expenditures from the CEO and the board members. Will it be successful? Why or why not?

Match (by letter) the following terms with their definitions. Each letter is used only once.

$$\begin{matrix} \text{Terms}\\ \hline \text{\_\_\_\_\_ 1. Publicly held corporation.}\\ \text{\_\_\_\_\_ 2. Organization chart.}\\ \text{\_\_\_\_\_ 3. Articles of incorporation.}\\ \text{\_\_\_\_\_ 4. Limited liability.}\\ \text{\_\_\_\_\_ 5. Initial public offering. }\\ \text{\_\_\_\_\_ 6. Double taxation.}\\ \text{\_\_\_\_\_ 7. S corporation.}\\ \text{\_\_\_\_\_ 8. Limited liability company.}\\ \end{matrix}$$

$$\begin{matrix} \text{Definitions}\\ \hline \text{a. Shareholders can lose no more than the amount they invest in the company.}\\ \text{b. Corporate earnings are taxed twice-at the corporate level and individual shareholder level.}\\ \text{c. Like an S corporation, but there are no limitations on the number of owners as in an S corporation.}\\ \text{d. Traces the line of authority within the corporation.}\\ \text{e. Allows for legal treatment as a corporation, but tax treatment as a partnership.}\\ \text{f. Has stock traded on a stock exchange such as the New York Stock Exchange (NYSE).}\\ \text{g. The first time a corporation issues stock to the public.}\\ \text{h. Describes (a) the nature of the firm's business activities, (b) the shares to be issued, and (c) the composition of the initial board of directors.}\\ \end{matrix}$$

Quiet Running, a closely held LLC, produces electric cars. It recently secured the rights to a patent that will allow it to produce such cars with a cruising range of nearly 500 miles. In order to meet the anticipated demand, it needs a large amount of capital to set up a new factory. You are the corporate counsel and are attending a board meeting when one of the company’s financial advisors suggests that the company “go public” with their stock. What advice would you give as to the potential impact of doing so on the company’s organizational form?

Suspect Company issued $600,000 of 9 percent first mortgage bonds on January 1, 20X1, at 103. The bonds mature in 20 years and pay interest semiannually on January 1 and July 1 . Prime Corporation purchased$400,000 of Suspect's bonds from the original purchaser on January 1, 20X5, for $396,800. Prime owns 60 percent of Suspect's voting common stock.

Required

Prepare the worksheet consolidation entry or entries needed to remove the effects of the inter-corporate bond ownership in preparing consolidated financial statements for 20X6.

Maryland Light, a U.S. light fixtures manufacturer, is considering an investment in Japan. The dollar cost of equity for Maryland Light is $13.34 \%$. You are in the corporate treasury department, and you need to know the comparable cost of equity in Japanese yen for a project with free cash flows that are uncorrelated with spot exchange rates. The risk-free interest rates on dollars and yen are $r_{\mathrm{S}}=5.64 \%$ and $r_{\mathrm{Y}}=1.28 \%$, respectively. Maryland Light is willing to assume that capital markets are internationally integrated. What is the yen cost of equity?

Sara Lee Corp., maker of food, beverage, and household products, is known mainly for its baked products, marketed under its corporate name. For the five years ending July 1 of each year from 2002 to 2006, their bakery division reported the following profits.

c) Think about the exponential smoother. If the parameter were$0.8$would you expect the prediction to be higher or lower? What if it were$0.2$? Describe.

You had $10,000 to invest. You put x dollars in a safe, government-insured certificate of deposit paying 5$ $0.05 x + 0.12 ( 10,000 - x ).$ $a. Simplify the algebraic expression. b. Use each form of the algebraic expression to determine your total interest earned at the end of the year if you invested$6000 in the safe, government-insured certificate of deposit.

The newest law firm in town paid a total of $\$ 33,860$ to a marketing firm for the research and development of the firm's corporate trade name and trademark. From this budget, a Web-site developer was paid $\$ 9,475$ for her creative work on the project. Her salary was what percentage of the entire amount?

Division When solving problems that involve percents, it is usually a matter of dividing one value by another.

Starting Hints To solve this problem, divide the salary of the Web-site developer by the total amount paid to the marketing firm to determine what percent the developer's salary was of the total.