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Firenze Company developed a specialized banking application software program that it licenses to various financial institutions through multiple-year agreements. On January 1, 2014, these licensing agreements have a fair value of $985,000 and represent Firenze’s sole asset. Although Firenze currently has no liabilities, the company has a $158,000 net operating loss (NOL) carryforward because of recent operating losses. On January 1, 2014, Parma, Inc., acquired all of Firenze’s voting stock for $1,170,000. Parma expects to extract operating synergies by integrating Firenze’s software into its own products. Parma also hopes that Firenze will be able to receive a future tax reduction from its NOL. Assume an applicable federal income tax rate of 35 percent.
a. If there is a greater than 50 percent chance that the subsidiary will be able to utilize the NOL carryforward, how much goodwill should Parma recognize from the acquisition?
b. If there is a less than 50 percent chance that the subsidiary will be able to utilize the NOL carryforward, how much goodwill should Parma recognize from the acquisition?
Name and briefly explain the five components of COSO's internal control framework. Explain the relationship between the Sarbanes-Oxley Act and COSO.
Give an example of a transaction that increases net cash flow but has no effect on net income. Please be clear about what items are increasing and decreasing in your example.
Ellis issues 9.5%, five-year bonds dated January 1, 2013, with a $560,000 par value. The bonds pay interest on June 30 and December 31 and are issued at a price of $594,086. The annual market rate is 8% on the issue date. Compute the total bond inte..
determine that the total estimated life should be 15 years with a salvage value of 4000 at the end of that time. Prepare the entry (if any) to correct the prior years depreciation.
Perez Company uses both standards and budgets. For the year, estimated production of Product X is 547,200 units. Total estimated cost for materials and labor are $1,203,840 and $1,586,880. Compute the estimates for (a) a standard cost and (b) a budge..
Evaluate the ethical implications of Acme's “deferral” of income taxes and who could be harmed by Acme's ability to “defer” income taxes payable for several years, despite positive earnings.
Savory Co. sold $340,000 of equipment during May under a two-year warranty. The cost to repair defects under the warranty is estimated at 7.0% of the sales price. On October 10, a customer required a $283 part replacement, plus $200 of labor under th..
nbspnbspredrafting contribution margin statements.austins shooters inc. operates a paintball course where customers can
Employees in 2012 paid 4.2% of their gross wages towards social security (FICA tax), while employers paid another 6.2%. How much will someone earning $63,000 a year pay themselves towards social security out of their gross wages?
The Winston Company estimates that the factory overhead for the following year will be $1,250,000. The company has decided that the basis for applying factory overhead should be machine hours, which is estimated to be 50,000 hours. Determine the tota..
There are certain problems in the evaluation of foreign financial statements that restricts the smooth running of business operations. The accessibility of data is a major challenge where financial information difficult in many countries. Do you thin..
Identify what types of trends you should be aware of in the industry and who the primary competitors are.
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