Thomas Company Compiled the Following Information from Its Financial Records

question 53

Multiple Choice

Thomas Company compiled the following information from its financial records for the year ending December 31, 2014:
$\begin{array}{ll}\text {Research and development costs incurred during 2014 }& \$1,200,000\\\text {Total assets }&5,200,000 \\\text { Current liabilities, interest bearing}&300,000 \\\text {Current liabilities, noninterest-bearing }& 800,000\\\text {Net income }&950,000 \\\text { Sales}&11,300,000 \\\text {Interest expense }&670,000 \\\text {Cost of capital }& 10\%\\\text {income tax rate }& 30\%\\\end{array}$

Thomas' amortization policy is 4 years. How much is the accounting distortion adjustment to invested capital when calculating EVA?

• A) $900,000
• B) $300,000
• C) $840,000
• D) $630,000
• Material from the appendix to the chapter is marked with an asterisk (*).

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Definitions:

Infancy

The period of childhood that begins at birth and lasts to about 18-24 months, characterized by rapid physical growth and cognitive development.

Period Of The Embryo

Lasting from the fourth through the eighth week of gestation, the time that most of the body’s organ systems and structures are forming.

Full Term

Refers to a pregnancy that reaches completion, typically around 39 to 40 weeks, leading to the birth of a baby.

Period Of The Zygote

Approximately a 2-week period from the time of fertilization of a human ovum by a sperm to the time of implantation in the uterine wall.