Question 2
Question # 00695584
Posted By:
Updated on: 06/08/2018 01:44 AM Due on: 12/31/2018
On January 1, Year 1, Head Ltd. purchased 50,000 common shares, representing 40% of the outstanding shares, of Toe Ltd. for $800,000. The assets of Toe included a building with a market value $300,000 greater than book value. The Building had a remaining useful life of 10 years.
During Year 1, Toe had a net income of $200,000 and paid dividends of $80,000. During Year 1, Head sold Toe merchandise for $240,000 at a gross profit rate of 40%. At year end, 50% of this merchandise remained in Toe's inventory. Head's tax rate is 30%.
During Year 2, Toe had a net income of $240,000 and paid dividends of $140,000. At year end, the market price of the shares was $18.
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Rating:
5/
Solution: Question 2 answer