23.docx - with a book value of $8,000 an estimated fair value of $9,500 and a 5-year remaining useful life Assume that straight-line depreciation is

23.docx - with a book value of $8,000 an estimated fair...

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with a book value of $8,000, an estimated fair value of $9,500, and a 5-year remaining useful life. Assume that straight-line depreciation is used to amortize any revaluation increment. No transactions between these companies occurred prior to 2017. Regardless of whether they combine, Parent plans to buy $50,000 of merchandise from Subsidiary in 2017 and will have $3,600 of these purchases remaining in inventory on December 31, 2017. In addition, Subsidiary is expected to buy $2,400 of merchandise from Parent in 2017 and to have $495 of these purchases in inventory on December 31, 2017. Parent and Subsidiary price their products to yield a 65% and 80% markup on cost, respectively. Parent intends to use three financial yardsticks to determine the financial attractiveness of the combination. First, Parent wishes to acquire Subsidiary Corporation only if 2017 consolidated earnings per share will be at least as high as the earnings per share Parent would report if no combination takes place. Second, Parent will
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  • Spring '17
  • Ellen Zitani
  • Balance Sheet, Generally Accepted Accounting Principles, Parent Inc.

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